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Market volatility in recent weeks has made it difficult for companies to go public. Initial public offerings (IPOs) in Hong Kong are dwindling, as issuers  find it harder to  get the desired price and raise enough capital for refinancing and expansion.
Europe's economic woes and stock market dips in Asia have forced investment bankers and companies to take a second look at their listing plans. 
There are daily news reports of various Hong Kong companies pulling the plug on their IPOs.  
This month alone a number of companies have cancelled their listing plans. Recent examples of companies that have done so are World Wide Touch Technology Holdings and Xinjiang Goldwind.  World Wide, a Hong Kong-based producer of touch pads, was due to announce the pricing of its HK$1.4 billion IPO, but was unable to arouse sufficient interest.
Likewise, Goldwind, which is listed in Shenzhen, says it is putting off its HK$9.09 billion public offering due to market volatility.
Industry insiders say that when considering an IPO, the two most important factors are the  pricing of the stock and how much the company wants to raise in the IPO, and if it has a chance of exceeding that amount.
If company directors are daring enough to consider an IPO, and there are a handful of them in Hong Kong, then the first hurdle  they face is to have strategic investors and the company agree on a price-multiple, which is the appropriate pricing per share.  
'If the companies are desperate, they may accept lower valuations, otherwise they may pull the deal if they can't sell as high as they want,' says John Tang, China strategist at Swiss-based investment bank UBS.  
'Therefore, economic problems always affect IPOs. It affects fund flows and investor momentum to buy stocks, so valuations are lower and they may not be able to sell as high as they want. Currently, lending is still loose and I don't see too much desperation for money from IPO companies.'
Euro-zone jitters and Asian stock markets slides have affected investor sentiment, which has resulted in less buying interest and lower valuations of new issues. 
Historically, new listings in Hong Kong tend to fare in tandem with equity markets.
'On the demand side, buying interest will be less as fund outflows from global institutional funds are likely, as seen during the 2008 global financial crisis,' says Fritz Man,  head of investment products, Asia, at Sarasin. 'On the supply side, lower-than-expected valuations and pricing will drive some companies to call off their IPOs. 
'There has been a pipeline of IPOs that have been called off due to the 2008 global financial crisis and if the recovery  materialises in the next two years, with the contagion effect well contained, sentiment will recover and, consequently, [so will] the IPO market,' Man says.
Companies often have to consider the consequences of shelving an IPO, which  involves additional risks and costs.
'Auditing may need to be updated, advisers may still charge [the firms], and they may leave a bad image with investors, and the future launch may be more difficult than the first attempt,' Tang says.
Although the tough economic climate has had a psychological effect on investors, leading to lowered expectations of the price-multiples of IPOs, the role of the Hong Kong stock exchange as a means of expansion into the mainland still exists. 
Therefore, IPO candidates in Hong Kong would not be  hit strongly, even  in the difficult economic environment, according to an analyst.
'One of the reasons that attracts companies to list  on the Hong Kong stock exchange is because they would like to participate in the economic growth of China, as well as expanding their businesses in China,' says Jack Chow,  audit partner at KPMG China.
'When companies get listed on the Hong Kong stock exchange, it will increase their profile in China and, as a result, increase their business activities. This will not be significantly affected by what happens in Europe or the United States.' 
Man says: 'If the [European] crisis and austerity effect is well contained within the peripheral economies, such as Greece and Portugal, the momentum of the global recovery should continue to support earnings and equity sentiments in the medium-term.' 
However, the contagion effect of austerity measures adopted by the larger economies, such as Germany, on the rest of the global economy still remains unclear.
'It is difficult to predict when, but so far economic indicators are still pointing to a slow but uncertain recovery,' Man says.
However, uncertainty in overseas stock markets may benefit the Hong Kong equity market.
'I predict more multinational companies will consider listing in Hong Kong because they may have difficulties in seeking new funds in their home markets,'  Chow says.
Tang agrees: 'In the third quarter of this year, the market may get better and we may see more IPOs.' 
Analysts also feel that once the major economic indicators of the US show signs of stability, the equity markets may follow and a bull run may ensue towards the end of  the year.



Market volatility takes toll on listing plans