As the Hong Kong market for initial public offerings heads into an ever-busy September, investors might wonder if the poor performance of deals in the first half will continue for the rest of the year. It's a relevant question given that there are about US$35 billion worth of deals pending for the second half. This week we ask the following: What sort of IPO themes will resonate with investors in the second half? What deals should investors look out for? What should they avoid? Chris Marschall (head of international listings, Asia, Royal Bank of Scotland) is upbeat. While most IPOs that priced in the first half are under water, Marschall says nine of the past 10 deals bigger than US$100 million are trading above their issue price. He points to the recent listings of Prada (raising US$2.5 billion), Samsonite (US$1.6 billion) and MGM China (US$1.6 billion), which all delivered double-digit returns. 'Investors are once again showing renewed enthusiasm for IPOs, in particular for consumer-related IPOs with a connection to Asian consumer spending and China,' he says. He expects the consumer theme to fare well, citing the strong debut of Sun Art Retail, the Chinese hypermarket chain late last month. 'With Macau gross gaming revenues for July up 48 per cent year on year, and Hong Kong watch and jewellery sales in June up 59 per cent, there still is plenty of cash in customers' pockets,' Marschall says. 'Chow Tai Fook is one to watch. Its US$4 billion IPO could occur as early as the fourth quarter.' He is less enthusiastic about companies reliant on exports to the eurozone. He cautions investors to be selective when evaluating mining stocks given that these may be affected by short-term swings in commodity prices. Poh Huay Imm (head of equity strategy, Asia-Pacific, Deutsche Bank Private Wealth Management) says the H-share IPO pipeline looks healthy in the second half. She says investors should watch for issues from the consumer discretionary space, such as luxury goods, hotels, travel and education. 'Domestic consumption should become the main growth driver for the Chinese economy,' Poh says. 'Consumer discretionary companies are not over-represented in the Hang Seng and Hang Seng China Enterprises indices - scarcity value should keep investors' interest in them.' She advises investors to note that the premium placed on Chinese shares versus their international equivalents has shrunk over the past 10 years. She says unless a company is a market leader, with unique products, services and high earnings, valuations of mainland firms (including IPOs) should closely track those of international peers. David Poh (regional head of asset allocation, Societe Generale Private Banking) says equities did not perform as expected in the first half, with the market rocked by the debt problems in the euro zone, the supply chain impact of the earthquake and tsunami in Japan, the political debate in the US on its debt ceiling and a potential hard landing on the mainland. Poh says recent macroeconomic data seems to indicate the global economy is slowing down quite dramatically. 'As many of these issues remain unresolved, it will be a challenging time for equity IPOs,' he says. Poh says domestic consumption listings will fare better than companies that rely on global economic activity. He also likes IPOs that promise high dividends to investors given the current low interest rate environment.