'Many electronic and garment companies were in trouble,' he said.

'Also, lots of people think that 1997 is an issue.' He said there was a pent-up demand to broker deals after a relatively long period of inactivity.

Buying a shell company is a quicker and cheaper way of getting a listing.

Underwriting fees usually make up 2.5 per cent of funds raised in a flotation.

Mainland firms were not likely to buy into shell companies this time around, he said.

China's austerity measures have made sure of this.

The recent change in China Securities Regulatory Committee (CSRC) leadership meant that any drastic policy revision was unlikely, he said.

In 1993, a CSRC internal circular banned takeovers by Chinese companies without its approval.

'I think this policy directive is still in place,' he said.

Mr Norman said the general offer threshold should come down from the current 35 per cent to 30 per cent, to meet the changing market environment.

More and more companies in Hong Kong now commanded a shareholding structure so well-spread out that it had become easy to take control simply by holding a stake of 30 per cent or less.

The rationale for a general offer rule was to give small investors a choice to opt out of their investment once effective control of the company had changed hands.

Mr Norman said the trigger point should be lowered.

'The lower the threshold, the better,' he said He said some buyers obtaining control of companies attempted to acquire slightly less than a 35 per cent stake in order to get around the rule.

The mandatory general offer trigger point is set out under Rule 26 of the Takeovers Code.

He expected to see shareholders with stakes of about 30 per cent reluctant to trade their shares once the threshold came down.

'There will be people [holding similar levels of stakes] battling for control of the companies,' he said.