Fewer mega-deals predicted for 2012
The IPO market in Hong Kong next year will be under the mixed influences of continued mainland growth and global uncertainties, which translates into more small and mid-cap deals and fewer mega ones, according to market sources.
Figures released by Hong Kong's stock exchange yesterday showed there were 115 listing applications in the pipeline, including 63 being processed and 51 granted approvals.
Dilys Chau, assurance partner at Ernst and Young, said the IPO market next year might see fewer mega-deals but more small and mid-cap companies as the global market was likely to remain volatile.
IPO deals have already dwindled in size and number. Data from Dealogic shows that there have been 61 IPOs in Hong Kong so far this year, raising HK$25.7 billion. That is less than half of the full-year amount for last year, which saw 84 IPO deals raising HK$63.4 billion.
'Big retail names overseas are still interested in listing in Hong Kong in order to boost their businesses on the mainland and in the rest of Asia, but they are hesitating because of market uncertainty,' Chau said.
The mainland's expanding economy would still make the more nimble small- and medium-sized retail companies eager to raise funds and expand, Chau said. For example, OTO Holdings, a Singapore-based body care product developer and retailer, is expecting to fetch HK$89.1 million in net proceeds this month from Hong Kong's stock exchange.
OTO will spend 56 per cent of its proceeds to open almost 100 more consignment counters and retail outlets on the mainland, particularly in foreign-owned upper-market shopping malls in the next three years.
However, Jeff Maddox, co-head of the capital markets practice of New York-based legal advisory firm Jones Day's Capital Markets, said the small- and mid-cap mainland companies found it frustrating to list in Hong Kong because of the vetting process.
He said the length of the vetting process could be unpredictable because it, unlike its counterpart in the US, also questioned the issuer on matters unimportant to investors, such as compliance with minor mainland laws and property valuation of immaterial real estate assets.
This could further drag down listing activities in Hong Kong next year because the market would be dominated by small- and mid-cap mainland firms which, when the capital market becomes more regulated, could find themselves in grey areas. It would also be unfavourable in a volatile market because the listing windows could be short, Maddox said.
