Scramble for capital to stoke IPO bonanza

PUBLISHED : Wednesday, 05 January, 2011, 12:00am
UPDATED : Wednesday, 05 January, 2011, 12:00am

The initial public offering bonanza in Hong Kong and on the mainland will continue this year as the mainland's small and medium-sized firms scramble for capital to speed up technological innovations, according to PricewaterhouseCoopers.

But despite a growing number of listings, funds raised from the two markets would drop from a year ago because of a lack of mega offerings, the accounting firm said.

A total 110 IPOs in Hong Kong may raise up to HK$350 billion this year, compared with HK$445 billion raised by 102 companies last year. The number of IPOs last year does not include those moving from the Growth Enterprise Market to the main board.

On the Shanghai and Shenzhen stock exchanges, PwC sees 400 IPOs this year, raising up to 400 billion yuan (HK$471 billion). A record 349 companies listed in these markets last year, raising 478.3 billion yuan.

Hong Kong led the world last year in IPOs, buoyed by two massive listings by Agricultural Bank of China and AIA Group.

'Last year, HK$250 billion came from two mega deals. Take out these deals and the rest only accounted for around HK$200 billion,' said Edmond Chan, assurance partner at PwC.

Hong Kong is unlikely to see IPOs of last year's magnitude, but Chan expects about 10 IPOs to raise between HK$10 billion and HK$20 billion each. PwC said most of the predicted 110 IPOs in Hong Kong will come from mainland companies looking to raise capital in the region.

On the mainland, the accounting firm estimates that 250 companies would list shares on the Nasdaq-style ChiNext market and the SME board, both of which are on the Shenzhen exchange.

'The continued growth of the GDP, ample fund supply and the limited channels for fund-raising will ensure the IPO market remains strong this year,' said Frank Lyn, PwC China Markets leader.

The mainland was the world's third-worst performing stock market last year, beating only Greece and Spain. Analysts and investors say the flood of IPOs soaked up liquidity, causing the downturn.

The China Securities Regulatory Commission controls the pace of IPO approvals on the mainland. It normally suspends offerings or slows approvals to boost the market when the sentiment is weak.

IPOs on the mainland are still believed to be a safe bet because the shares mostly rise on the first day of trading. Last year, only 26 stocks traded below the offer price on their debut while the rest rose. Thirty-one stocks rose more than 100 per cent on the first day.

The number of IPOs on the Shanghai exchange - the bigger of the two mainland bourses that is normally home to big-cap stocks - would jump from 28 to 150 this year, PwC said.

Easy gains

IPOs on the mainland are believed to be a safe bet as they usually rise

Last year, 26 stocks traded below the offer price on their debut while all the rest rose, and 31 rose more than: 100%