Shanghai, HK vie for IPO lead

Traders at the Shanghai Stock Exchange in Shanghai, Sept 22, 2015. [Photo/VCG]

More companies bet on high valuations in mainland, instead of going overseas

As New York remains on track to knock Hong Kong off its pedestal to become the world's biggest listing venue this year, the Asian financial hub is wrestling with Shanghai for the second place in the league tables.

Over the first nine months of the year, some 106 deals raised HK$85 billion ($11 billion) in Hong Kong, trailing the 105 billion yuan ($16 billion) raised in Shanghai, according to data from global accounting firm Deloitte.

"Though brokers and bankers in Hong Kong are anchoring their hopes on a sharp upturn in business to help the city overtake its mainland peer in the final quarter of 2017, I think Shanghai is likely to hold its lead and secure the second spot throughout this year," said Edward Au, Hong Kong-based co-leader of the national public offering group at Deloitte.

The initial public offering (IPO) market in the Chinese mainland has gained huge momentum so far this year from China Securities Regulatory Commission's efforts to step up IPO approvals, in a sign of its determination to implement IPO reform toward a registration-based system.

"As regulators keep a steady pace to give a green light to no less than 30 IPOs on a monthly basis, more and more mainland companies, betting on higher valuations back home, are relishing the idea of a flotation on the mainland, rather than having their eyes trained on overseas destinations," Au noted.

"Though there is a logjam of roughly 500 firms still lining up to get the nod, you can see policymakers' efforts to ease IPO process really bolster the market a lot," he added.

If regulators could maintain the pace to give the go-ahead to IPOs in the remaining months, the Shanghai Stock Exchange, coupled with the smaller, tech-heavy Shenzhen Stock Exchange, are projected to see as many as 480 companies make their mainland stock market debut, raising up to $250 billion yuan by the year end, Deloitte said.

Following the $1 billion-plus offering from ZhongAn Online Property Casualty Insurance－the very first fintech flotation in Hong Kong－the Asian financial center, which has retained the crown as the world's top fundraising destination for the past two years, is looking to welcome one or two more eye-catching listings from sizeable technology firms in the final three months of the year, said Dick Kay, Shanghai-based co-leader of national public offering group at Deloitte.

"Given that the enthusiasm of investors oversubscribing for ZhongAn's offering runs really high, we have good reasons to believe the upcoming technology flotations could come as a 'booster', putting Hong Kong on course to secure the third spot, with as many as 150 firms raising up to HK$150 billion for the whole year round," Kay said.