The mainland's resumption of share sales on May 8 will not affect its companies' listing frenzy in Hong Kong in the short-term.

 

So say analysts, defusing worries of a possible decrease in the number of listing candidates there.

 

They cite Hong Kong's position as a regional financial hub and a raft of incentives that have been driving the local market to new highs as their reasons.

 

"Hong Kong still has a monopoly position in the region (as a fund-raiser)," said Andes Cheng, associate director of South China Research Ltd.

 

The city's mature financial system, abundant international capital and its accelerated economic integration with the mainland have helped it to become the first-choice destination for mainland firms that seek alternatives to A-share markets.

 

That advantage will not wither for at least two years, Cheng said.

 

Hong Kong was the world's eighth largest bourse in terms of capitalization by the end of 2005 and Asia's second largest.

 

The recent lasting bullishness of the Hong Kong market is another factor that might be luring companies seeking listings.

 

The benchmark Hang Seng index has continually risen to new highs in the past few weeks, boosted by the peaking of US interest rates and the mainland's approval of the Qualified Domestic Institutional Investor scheme.

 

"(For the rest of the year), the market will be good for selling shares," said Cheng.

 

By comparison, mainland markets are still lagging behind and will probably take some time to become more active.

 

Companies eager to sell shares on mainland bourses will be those that have already traded their shares in Hong Kong, said Tang Sing-hing, associate director with Tung Tai Securities. But that won't weaken Hong Kong's attraction.

 

He said those firms with Hong Kong-listed H shares will jump at the chance to float shares at home, where they may get a higher price-to-earnings ratio.

 

Hong Kong has witnessed a listing boom from mainland companies since the mainland suspended share sales a year ago prior to its non-tradable share reforms.

 

China is in the process of altering its stock market from one where the majority of equity ownership of listed companies is in the hands of the State or State-owned institutions.

 

In 2005, Hong Kong saw 70 companies listed, involving a record HK$192 billion (US$25 billion) in initial public offerings (IPOs). Mainland companies realized 80 per cent of that.

 

The listing fever sees no sign of abating this year. Already 12 mainland companies have gone public in Hong Kong. Media reports suggest more than 20 others are preparing to do so.

 

However, Hong Kong should not be sitting back and relaxing, as local analysts cautioned that the attraction of its bourse might wane in a few years after the mainland markets mature.

 

"In the long-term, the mainland will become a big competitor to the Hong Kong exchange," said Cheng, citing the improvement of its monetary and securities regimes.

 

(China Daily May 11, 2006)