Hong Kong companies have been merging and acquiring at a rapid pace this year, though far below last year's record level, according to Securities Data Management. Most of the US$8.86 billion spent in 121 transactions so far this year involved companies buying mainland operations or other SAR businesses, the research company said. In the first half of this year, Hong Kong companies spent $8.1 billion on 105 transactions, up from $7.9 billion spent on 146 transactions in the second half of last year. Six of the top 10 transactions were in the telecommunications, fund-management and real estate sectors. The largest transaction was China Telecom's $2.9 billion acquisition of Jiangsu Mobile Communications. Of the top 50 mergers or takeovers, 34 involved companies acquiring or merging with other SAR businesses. Fourteen mergers or takeovers involved mainland enterprises, while the remainder involved companies taking over businesses in Thailand and Indonesia. Securities Data Management said the region's economic turbulence contributed to plunging share prices and weakened balance sheets, making many companies vulnerable for takeover. For example, red-chip companies are currently trading at 6.9 times their 1998 earnings estimates, or at a 29 per cent discount to the Hang Seng Index or at a 28 per cent discount to their net asset values, according to Goldman Sachs. Last year, Hong Kong companies spent a record $22 billion on 293 mergers and acquisitions. Most of these transactions were concluded in the first half of the year, when companies spent more than $14 billion on 147 transactions, easily outpacing the previous year's record of $10.6 billion.