HKEx's 2009 fund raising expected to rank 1st globally

HONG KONG: Fund-raising activities in Hong Kong are likely to remain vigorous in 2010, as more mainland and overseas companies scramble to cash in on the recent boom in the city's equity market.

After a year of subdued activity amid the global financial crisis, initial public offering (IPO) activities in Hong Kong started to pick up in the second half of 2009, taking advantage of the 90 percent surge in the benchmark Hang Seng Index since March this year.

Out of the 69 new listings in the local stock market in 2009, 55 companies debuted on the bourse in the second half.

According to Ernst & Young, the Hong Kong Stock Exchange is expected to overtake the New York Stock Exchange and the Shanghai Stock Exchange to rank first in terms of global IPO funds raised in 2009.

The international accounting firm also estimates the city's bourse will have captured a total of HK$246 billion in 2009, accounting for 25.2 percent of IPO capital raised worldwide.

Terence Ho, strategic growth markets leader of Ernst & Young, said the IPO frenzy in Hong Kong will likely to continue in 2010, with financials and real estate sectors ranking first in terms of total funds raised.

Retail, consumer products and industrials, meanwhile, will be the top sectors with the largest number of deals in 2010, he predicts.

Ho also expects the Hong Kong Stock Exchange to raise around HK$370 billion next year, which is 28 percent more than the historical high of HK$290 billion in 2007.

"Mainland companies will continue to be the major driver for IPO activities in Hong Kong. In addition, the listing of companies from Hong Kong and foreign countries will increase in 2010. We will also see more fund raising activities through spin-offs," Ho said.

Mainland companies, as in the past few years, have been dominating the IPO market in Hong Kong over the past year.

Among which, China Minsheng Banking Corporation, with a total of HK$30.1 billion raised, held the biggest public share sales on the Hong Kong bourse in 2009.

Another mainland financial colossus, China Pacific Insurance, listed on the Hong Kong mainboard on December 23, raised HK$24.1 billion to rank second.

Linus Yip, strategist at First Shanghai Securities, said the city's IPO market in 2010 will depend very much on mainland firms, which currently account for almost 90 percent of all the new listings in Hong Kong.

He said companies based on the mainland are still very interested in listing in Hong Kong, in order to attract more overseas investment.

"The majority of foreign capital inflow in Hong Kong has been invested in the city's IPO market, instead of purchasing the already listed shares. Foreign capital investment is likely to continue fueling the IPO market next year," Yip said.

Analysts, on the other hand, expect more overseas companies to be listed on the Hong Kong bourse in 2010, following the IPOs of Russia-based aluminum producer United Company RUSAL and American International Group's Asian life insurance subsidiary, American International Assurance (AIA), in early 2010. RUSAL, hoping to become the first Russian company to go public in Hong Kong, has planned to raise around $2 billion from selling a 10 percent stake in Hong Kong to repay debt.

Market sources, meanwhile, estimate that AIA may raise as much as $20 billion in Hong Kong in the first quarter of 2010, making it the biggest IPO in the city next year.

"Foreign companies may prefer to list in Hong Kong, as a steppingstone to enter the mainland market. The city's regulatory system also facilitates listing by overseas companies," said Kingston Lin, business development director of OSK Securities.

Germany-based Schramm, a manufacturer and supplier of coatings, was one of the very few overseas companies listed on the Hong Kong bourse this year.

Schramm's chief executive Peter Brenner said the mainland market has overtaken Europe to represent around one third of the company's revenue.

He expects the company's listing in Hong Kong will be an ideal springboard to further expansion on the mainland.

With the robust participation of both mainland and overseas companies, it seems quite certain that the city's IPO market will continue to shine in the new year, Brenner predicts.

(HK Edition 12/31/2009 page6)