Market rebound reignites IPO hopes

A mild recovery in Chinese stocks is fuelling a fresh wave of small-cap initial public offerings aimed to take advantage of improved listing prospect based on hopes that the US Federal Reserve will extend quantitative easing.

A broad-based rally in the region's markets was triggered by the change in sentiment after the figure for first-quarter US economic growth was revised down to 1.8 per cent from 2.4 per cent.

At least five small-cap firms rekindled their listing plans and kicked off their roadshows yesterday as the city's benchmark Hang Seng Index rose for a third day after a sharp selldown since the middle of the month.

As some of these listing hopefuls failed to outline a clear business strategy that differentiates them from their peers, a common strategy under the rough market conditions was to offer a wide price range for the IPO. In one or two cases perhaps, the firm might be looking, once listed, to sell itself as a shell company a few years down the road.

In a show of tentativeness, China Golden Phoenix, a manufacturer of crystallised stone, quoted a price range that would translate into the firm raising between HK$280 million and HK$840 million.

Mainland property developer Modern Land (China) plans to raise up to HK$944 million, while Wisdom, a Beijing-based media and advertising firm, started bookbuilding yesterday in the hope of raising up to HK$1.12 billion through a float after capturing at least US$20.9 million in four cornerstone commitments.