BACK-DOOR listings by mainland enterprises on the local stock market will be only a short-lived trend in 1993 despite their current popularity, says Peregrine Investment Holdings managing director Francis Leung Pak-to. He said a large number of mainland firms were known to have approached merchant banks seeking listed vehicles in Hongkong. Mr Leung said back-door listings would become much less cost-effective given the rising demand and increasing premiums to buy suitable shell companies. ''Current prices for a shell have risen to as high as $50 million, which would make a direct listing through a Hongkong-incorporated vehicle more justified,'' he said. He agreed that back-door listings would bring a wider disparity in the quality of the new issues but he also believed that local market practitioners would apply enough self-discipline to ensure quality offerings. ''The methods of flotation should not determine whether a new issue is good or bad. The stock market itself should decide,'' he said. Besides back-door listings, the local stock market is also expected to see a few substantial direct listings by mainland industrial conglomerates. Out of the nine candidates, Mr Leung expected only a few would be successful as problems such as the lack of company laws and an inadequate regulatory framework had yet to be solved. Therefore, Mr Leung said some mainland companies with a business offshoot in Hongkong would be more interested in raising funds through new listings of their locally-based companies. Despite that, four out of the five largest mainland groups already have a listing vehicle. He said a lot more flotation plans would come from other municipal and provincial authorities' business concerns in Hongkong. These mainland interests would come from the northern provinces of China, while some Sino-foreign funded ventures would also be very keen on overseas listings. ''As long as China sticks to its market reform and open door policy, mainland business will seek overseas listings through many different channels,'' Mr Leung said. Peregrine Investment has set up a financial consultancy in a joint venture with the city authorities in Beijing which will assist companies to look for foreign capital. It has also set up a representative office in Shanghai.
