World-leading financial service firm PricewaterhouseCoopers predicts that funds raised through new IPOs (initial public offerings) in Hong Kong are likely to top the record high of HK$200 billion (US$25.6 billion) this year, surpassing the upward momentum of 2005.

 

Last year was a record-breaking year for IPOs in Hong Kong in terms of total capital raised, up 45 percent than the previous HK$132 billion record in 2000, a report by PricewaterhouseCoopers showed.

 

"Despite uncertainties on interest rates and oil prices during 2005, about 70 companies would be listed on the Main Board and Growth Enterprise Market (GEM) this year," said Richard Sun, partner of PricewaterhouseCoopers' Capital Markets Services Group.

 

He estimates the amount of fund raised could hit HK$200 billion (US$25.6 billion), with the projected average price per earning hovering around 10 to 15.

 

These results were contributed by the return of investors' interests on the equity market toward the end of 2005, and fund raised by large State-owned enterprises, Sun explained at the press briefing yesterday.

 

In 2005, the 70 IPOs raised HK$192 billion (US$24.6 billion), out of which 80 percent were raised by the Chinese mainland's enterprises.

 

"These figures clearly indicated that Hong Kong has succeeded in establishing its position as the primary international capital raising platform for China," said Sun.

 

China's booming economy and appetite for funds is also expected to continue fuelling the Hong Kong IPO market.

 

"We expect to see sizeable and quality listings in 2006," said Frank Lyn, managing partner of PricewaterhouseCoopers in Beijing. "There is a strong pipeline of companies with powerful financials, with the major force coming from mainland-based financial services companies and logistics companies that are ready to come to market."

 

Bank of China (BOC) and Industrial and Commercial Bank of China (ICBC), two of the "big four banks," are expected to raise at least 120 billion yuan (US$15 billion).

 

Insiders said that BOC would float its shares on the Hong Kong bourse in early 2006, while ICBC would like to be listed by the end of the year.

 

"One thing for sure is that these two financial giants will stagger their listing time," Lyn told China Daily.

 

Given the robust outlook of China's economy, PricewaterhouseCoopers predicts Hong Kong will continue to be a vibrant market for mainland stock offerings.

 

"Thanks to a free flow of capital, an established regulatory framework and legal system, and an adherence to international accounting standards, China's mainland enterprises will continue to choose Hong Kong as a window for raising funds on the international market," said Lyn. "Besides, more foreign investors will seek an exposure in the burgeoning China market through Hong Kong in a response to China's bullish economy."

 

(China Daily January 5, 2006)