More companies to tap market for funds as stocks push higher
New capital raising by listed companies will continue to boom after hitting a more than two-year high last month.
"As the market recovers, we would expect to see more medium and large-sized deals launched, and this will serve as an indicator of a hopefully more sustainable market recovery," said Joseph Lee, a partner with international law firm Cadwalader, Wickersham & Taft.
The firm has been involved in a number of recent share placements including those by Chow Sang Sang and CSI Properties.
Data from Dealogic shows Hong Kong had the busiest month for follow-on offerings in more than two years last month.
Thirty-nine companies rushed to the market to raise funds through share placements or right issues, the most since November 2010, when 40 firms conducted such follow-on offerings.
The window for this round of speedy fundraising activities through placements might continue after the Lunar New Year holiday and could last until next month, said a senior banker at a major investment bank's syndications desk who refused to be named.
Property firms would be the major player for such deals in order to lower their gearing ratios and refinance their debts, he said.
For the remainder of the year, the opportunities might be more "patchy", he said.
UOB Kay Hian strategist Steven Leung said the window of opportunity for fresh capital raising could close if economic data from the United States and mainland China disappointed, or the US Federal Reserve ceased its asset purchase plan.
But for last month at least, the benchmark Hang Seng Index repeatedly hit fresh 21-month highs on the back of renewed risk appetite among institutional investors, who poured capital into equities.
The index finished the month with a 4.7 per cent gain.
By deal value, the 39 companies that came to the market with follow-on offers raised US$4.57 billion, compared with US$9 billion raised from such offerings in December, according to Dealogic.
Financial firms raised the most, thanks to a big sale of shares in Industrial and Commercial Bank of China by Goldman Sachs, while property firms ranked second.
Goldman sold the ICBC shares at a 3 per cent discount to their previous close, with the sale attracting about 100 investors.
Follow-on offerings are the public issue of shares by an already listed company. They may include "top-up" placements, which allow companies to increase their share floats by selling new shares, and "accelerated book-building", which allows shareholders to sell existing shares within a very short time.
Last month, most of the deals were accelerated bookbuilding activities.