OVERSEAS underwriters will continue to take on initial public offering business for mainland companies this year despite the higher risks in a sluggish market, says Smith New Court director Norman Li.
However, Mr Li said competition would still be confined to major underwriters with strong brokerages to handle the substantial new issues.
As institutional investors tended to be more demanding about the quality of the new mainland stocks, he said underwriters too had to carefully weigh the risk.
''When mainland stocks were first available in the international market in the first half of 1992, investors seldom asked details about them, but now they are much more selective,'' Mr Li said.
Despite the downturn in mainland stock markets in the third and fourth quarters, no new issues were under-subscribed, he said.
Mr Li said the mainland authorities were also becoming more realistic about the pricing of new issues.
For instance, price-earnings multiples for new issues in Shanghai had been reduced from a high average of 18 times to a more acceptable level of 10 to 12 times.