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Eric Ng

Forty-one companies have postponed listing with Hong Kong Exchanges and Clearing because of volatile sentiment.

Sponsors said they were reluctant to underwrite initial public offerings (IPOs) for small companies, especially on the Growth Enterprise Market (GEM), amid the present sluggish sentiment.

'It is not only a matter of pricing, but rather whether we will be able to sell the stock at all,' said one sponsor.

He said the recent correction in global technology counters had made it even more difficult to sell shares in GEM companies as the second board was tailored for now unfashionable tech stocks.

Thirty of the 41 companies applied for main-board listings, with the remainder seeking to list on the GEM.

Market sources said some companies, especially GEM candidates, were being forced to let their listing plans lapse because their sponsors were refusing to underwrite the issues.

Withdrawn or lapsed applications to list on the GEM board totalled 15 at the end of last month compared with eight a month earlier, while the figure for the main board was steady at two.

The pace of listings on the GEM has slowed significantly in the past two months, with only four companies scheduled to list in September and this month. In the same period last year 10 companies were scheduled to list on the main board. In contrast, 16 companies were listed on the GEM in July and August, compared with only five companies listed on the main board.

Since last month, the GEM Index has dropped 26.4 per cent, compared with a 12 per cent drop in the benchmark Hang Seng Index.

Sina.com  - a Nasdaq-listed Chinese portal operator - said it had temporarily suspended its plans for a GEM listing partly due to present poor investment sentiment towards the new market.

I-Quest has received approval to list but has been forced to put its listing plan on hold due to unfavourable market conditions.

'We are still evaluating our options,' said chairman Anthony Blass.

'The conditions are very fluid in the market right now.'

The company, which helps hotels install high-speed Internet access infrastructure, received approval in May from the GEM listing committee. If it fails to list within six months from the date of approval - some time next month - it will have to re-apply.

Mr Blass earlier this year had said the company was aiming to raise up to HK$1 billion to fund international expansion.

He said the delay in I-Quest's listing was purely due to market conditions and that there was no pricing disagreement with its sponsor ING Barings.

'Actually we never got that far [on making a decision on pricing],' he said.

Future Solutions is another candidate waiting for more favourable market conditions to list. The company provides information technology systems integration services and software solutions which enable mobile-commerce.

Core Pacific-Yamaichi Capital managing director D.C. Lee, who is also a GEM sponsor, said investment banks were being very cautious in selecting companies to sponsor.

'No one wants to buy dotcom companies anymore. We have to be very careful to select companies that have solid businesses and good potential in order to be able to sell them,' said Mr Lee.

Lawrence Fok Kwong-man, deputy chief operating officer of the exchange said he was not worried about the slowdown in listings because it was a cyclical issue.

'When market sentiment returns and there is demand for certain kinds of stocks, companies will come back again. The slowdown in listing pace is not particular to Hong Kong, but a global phenomenon,' he said.

'Whether companies want to list or not is beyond the exchange's control. It is up to the market to decide.'

Vickers Ballas corporate finance manager Calvin Lau said some candidates might have decided to shelve listing plans because pre-marketing efforts showed that market valuations would be not much higher, or even lower, than the valuations at which strategic and venture capital investors had bought stakes.

'Floating the company at such valuations would make these investors quite uncomfortable,' he said.

'To a certain extent, these investors have a say in the listing plan's progress.'

He expected that once market conditions improved, a large number of shelved IPOs would flood the market.



Stalled IPOs await brighter market