IPOs face bright 2012 'if euro woes kept in check'
Initial public offerings in Hong Kong could raise HK$250 billion in 2012, only HK$10 billion short of this year's estimated total, if the world is spared from further shock from the euro-zone crisis, Ernst and Young predicted yesterday.
The global auditing firm predicted Hong Kong would raise over HK$260 billion this year since it had already raised HK$253 billion as of yesterday.
Hong Kong was tipped to top the global fund-raising chart this year together with New York, which could raise US$34 billion (HK$265 billion).
Ringo Choi, South China regional managing partner of Ernst and Young, said the uncertainty around the euro-zone debt crisis had undermined investors and issuers in the IPO market this year.
IPO results in Hong Kong this year are expected to dip about 40 per cent compared with 2010. Globally, IPOs are expected to raise US$170 billion this year, down 40 per cent, according to Ernst and Young.
'We don't expect the euro-zone crisis to worsen a lot more ... there have been positive developments, such as the European Central Bank's lending to European banks,' Choi said, explaining the HK$250 billion estimate for next year.
But he said the market could turn 'really, really bad' if there was a further deterioration in the euro debt crisis.
Dilys Chau, assurance partner of Ernst and Young, said she was unsure whether Hong Kong would continue to top the chart next year.
'The market is very sensitive to any news from the euro zone,' Chau said.
She said Hong Kong, which continued to be a gateway between the mainland and global markets, should continue to be an attractive IPO destination for mainland and international companies.
IPOs next year were expected to focus on retail and consumer products, financials, industrials and resources.
ANZ senior economist Raymond Yeung said the fundamentals of the IPO market should remain bullish in the first half of next year because of the deadlock in the euro-zone crisis.
Global markets would still be faced with a credit crunch and a liquidity squeeze, Yeung said.
The European Central Bank had yet to agree to launch monetary easing measures, which could be interpreted as undermining the central bank's role in controlling inflation, he said.
Yeung said the uncertainties in the euro zone, together with pressure on European banks to recapitalise and scale down their capital financing activities in Asia, would continue to haunt the market.
The overhang was likely to persist even though an anticipated reduction in the reserve ratio requirement for mainland banks could lift investment sentiment.
The main board turnover of the Hong Kong stock exchange hit HK$41.3 billion yesterday, improving from the day before, when turnover hit a low for the year.
But it was still well below the average daily turnover for the first 11 months of HK$71.8 billion.
