FUNDS RAISED THROUGH initial public offerings in Hong Kong are headed towards a record high of $200billion this year as more and more mainland companies look for capital.
According to accounting firm PricewaterhouseCoopers (PwC), many of these are smaller domestic and privately owned mainland companies, or Taiwanese-invested enterprises operating in China.
One of the reasons for the increasing amount of funds raised on the Hong Kong stock exchange is a reluctance on the part of mainland companies to undergo the stringent and ongoing compliance requirements that the Sarbanes-Oxley Act requires to list in the United States.
'It isn't because they are not capable of reaching the standard, they are considering the cost versus the benefit of compliance,' said Ernest Ip, partner and assurance leader for Hong Kong and China at PricewaterhouseCoopers.
'For a company choosing to list in the US, the costs are all related to compliance but the benefits are that the company is listed in a prestigious financial market and gains exposure, a wider shareholder base and investors to participate as shareholders,' he said.
'But having said all that, the Hong Kong market attracts the same shareholders as the US market. It thus becomes a question of what the listing status in the US means to an individual company. In the past it was nice to have this status, but it has now become very costly and compliance is an ongoing cost.