Mainland growth spurt set to boost Hong Kong floats in 2013

More companies expected in list in HK this year, thanks to Beijing's expansion policies

PUBLISHED : Thursday, 03 January, 2013, 12:00am
UPDATED : Thursday, 03 January, 2013, 5:07am

The market for initial public offerings (IPOs) in Hong Kong is expected to rebound in the second half of this year as the impact of Beijing's pro-growth policies begins to turn around the mainland's tepid economic growth, according to PricewaterhouseCoopers (PwC).

Benson Wong, a partner at PwC's Hong Kong office, yesterday predicted that mainland policymakers will reach deeper into their tool kit, helping to support new listings in Hong Kong, including several mega deals from the finance and information technology industries.

Last year, the number of companies that listed dropped sharply even though the number of unsuccessful applicants remained relatively unchanged, according to the Hong Kong stock exchange.

Few expect the local exchange will witness a resurgence of public offerings in the next 12 months as the continuing recession in the euro zone is likely to deepen further and tax increases and spending cuts hobble the recovery in the United States.

The number of listing applicants fell sharply to 108 last year from 210 in 2011, while companies that received listing approval declined to 71 from 152, highlighting the tough market conditions that the issuers and bankers faced in 2012.

Despite uncertainties stemming from a bleak global economic outlook, Wong said investors remain bullish on the Chinese growth story and the current cost of credit is attractive for companies raising capital.

Edmond Chan, a partner at PwC, said: "The vast majority of Hong Kong IPOs will come from the mainland, with about five to 10 companies coming from overseas."

Chan expects more small and medium-sized enterprises from the mainland to list in Hong Kong as the China Securities Regulatory Commission has eased rules for overseas listings.

Chan predicts total capital raised through listings in Hong Kong to be in the range of HK$120 billion to HK$150 billion this year. Last year, offerings in Hong Kong raised HK$89.8 billion, after HK$272.3 billion raised in 2011, according to PwC.

With the chance of a potential economic stimulus from Beijing, Chan forecast the Hong Kong index may shoot up to the 25,000-point level, which should help listing hopefuls set their share prices higher.