Appetite fades for corporate purchases

Survey shows lower interest among Hong Kong firms for growth through acquisition

PUBLISHED : Wednesday, 10 April, 2013, 12:00am
UPDATED : Wednesday, 10 April, 2013, 3:57am

The appetite for acquisitions among Hong Kong businesspeople has dropped to the lowest level in six years, battered by renewed worries about the euro-zone's debt problems, accounting firm Grant Thornton said yesterday.

The firm expects overall sentiment in Hong Kong and the mainland to gradually recover in the third quarter after policymakers in Beijing unveil their implementation programme for the 12th five-year plan, the country's key economic and development blueprint for the next few years.

Grant Thornton partner Eugene Ha said most listed and private companies remained "sceptical and cautious about the global economic outlook even though cash levels among listed firms look ample".

Ha said the Portuguese constitutional court's refusal to authorise the full version of the latest round of austerity measures was one warning sign for the euro zone.

The share of local firms planning to pursue acquisitions fell to 18 per cent this year, the lowest level since 2008, while the proportion of mainland executives looking to buy assets slipped to 28 per cent, a three-year low, according to the Grant Thornton report, based on a survey of 200 Hong Kong and 400 mainland executives.

Ha, a Hong Kong-based certified accountant, admitted that only a handful of local blue-chip companies had enough funding and deal sourcing skills to pursue overseas acquisitions through a mix of capital-raising mechanisms in the stock market and inexpensive loans from deal-hungry banks.

The general outlook for Hong Kong and mainland markets looked rosier after the two annual meetings of the country's legislators and political advisers, he added.

On a bright note, Ha said slowing lending on the mainland was likely to benefit the local capital pool because mainland firms preferred to park their cash in less restricted markets such as Hong Kong and Singapore.

The People's Bank of China has sent clear signals that it is preparing to rein in lending on rising concerns about the country's property markets as well as fresh wave of export-driven inflation problems amid Japan's massive quantitative easing.