Signs of new life in I.P.O. market
Some mainland firms may revive listing plans in Hong Kong to fund further expansion as the authorities seek to tighten credit at home
Hong Kong's dismal listings market has shown signs of a nascent recovery with some municipal-level mainland lenders and brokerage houses signalling they will retry offerings amid improving sentiment.
Listing candidates, including China Galaxy Securities and China Everbright Bank, plan to proceed with offerings in the second quarter to replenish their capital base for further expansion in increasingly competitive conditions at home.
Policymakers in Beijing have sent clear signals that the authorities will rein in credit, given concerns about rising inflation.
"Mainland financial firms are relaunching their long-awaited plans to go public in Hong Kong starting from this month," Deloitte Touche Tohmatsu partner Edward Au said. "Many of them have substantially slashed their original IPO size to attractive valuations."
State-controlled China Galaxy Securities, the country's seventh-biggest brokerage firm by assets, will seek approval on April 11 for a proposed flotation that could raise up to US$1.5 billion.
Along with other city commercial banks on the mainland, Shanghai-listed China Everbright Bank is making its third attempt to tap the Hong Kong market.
It scrapped a deal in September, even though the Beijing-based lender had strong support from cornerstone investors.
Au said overall market sentiment had been lifted by retail buyers looking for short-term profit. And the oversubscription of new share offerings should give issuers a lot of confidence to go ahead with flotations.
"The listing window in Hong Kong could provide an alternative financial channel for mainland firms as the domestic market has been virtually shut down since October," Au said.
In the first three months, the capital raised through Hong Kong's IPO market dropped by 17 per cent to HK$8.1 billion from a year earlier. Many listed firms are seeking capital via new shares, convertible bonds and debt.
"Apart from the listing plans of mainland firms, local property developers such as Hopewell and New World Development are considering spin-offs and separate listings of their Hong Kong properties, which could raise a combined HK$10 billion in the second half," Au said.
According to bankers familiar with the listing matters, New World Development, controlled by Cheng Yu-tung, is looking to raise US$1 billion through a spin-off listing of its hotel units, while Hopewell, a conglomerate that has infrastructure and property projects on the mainland and in Hong Kong, is seeking US$800 million in a separate listing of its Hong Kong properties.