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Enoch Yiu

The planned launch of the Growth Enterprise Market (GEM) within the next two months is unlikely to be affected by poor market sentiment, according to a GEM sponsor.

 The Hang Seng Index has sunk from a high of 14,506 in July to 12,134 last week, before recovering in the past three trading sessions to close at 12,863 on Friday.

 The recent weak market performance, driven by volatility on Wall Street, led to the postponement of mainland offshore oil giant CNOOC's initial public offering two weeks ago.

 Mainland-backed Brilliance China Automotive Holdings also received a poor response to its recent equity offering in Hong Kong, with the underwriters selling only 6.4 per cent of 2.17 million shares in the company's Hong Kong tranche.

 Helen Zee, executive director of Dao Heng Securities - one of the sponsors of the GEM, believed GEM IPOs would fare better.

 'The companies to be listed on the GEM are mainly hi-tech or telecommunications enterprises,' she said.

 She believed the GEM would be able to start up late next month or in early December as planned.

 However, she admitted the current market would be difficult for non hi-tech flotations.

 'I believe there will be only a small number of IPOs in the fourth quarter of this year,' she said.

 'Only companies with very good profit records and prospects would be able to launch IPOs in the rest of this year.'  She believed the IPO of the Government's Tracker Fund, to be launched today, would receive a good response.

 Buyers of the Tracker Fund would be long-term investors who were unlikely to be affected by short-term volatility, Ms Zee said.

 Looking ahead, Ms Zee believed there would be more IPOs next year.

 'Company profits are expected to turn around next year, which will allow more companies to qualify for stock exchange listings,' she said.

 Ms Zee also expected many listed companies would continue to raise funds via share placements next year.

 This year's large number of share placements was a result of banks' restrictive corporate lending policies, she said.

 Banks had been forced to adopt more prudent lending policies due to the financial turmoil.

GEM 



Current climate seen as 'difficult' for non hi-tech IPOs