Initial public offerings (IPOs) on the Shanghai bourse are expected to overtake those in Hong Kong in 2007 as more Chinese companies return home, making it Asia's biggest center for IPOs, two accounting firms said yesterday.
"We predict the capital raised through IPOs in Hong Kong will reach HK$150 billion in 2007, while the figure for the mainland is HK$200 billion, reflecting the trend of sustainable economic increase on the mainland," said Frank Lyn, PricewaterhouseCoopers' China markets leader.
Ernst & Young shared this view but offered a different forecast.
"Propelled by the issue of A shares by companies with listed H shares, Shanghai will overtake Hong Kong by a narrow margin in 2007, with total IPO proceeds forecasted to reach 280 billion yuan," said Conway Lee, general manager of Ernst & Young's China Business Development.
The last time Shanghai raised more capital from IPOs than Hong Kong was in 2001.
Around 60 Chinese and international firms raised HK$325.4 billion through IPOs in Hong Kong in 2006, a record high versus HK$165 billion the previous year, according to Ernst & Young.
The rapid increase in capital raised in Hong Kong was led by several large deals last year, including the world's biggest IPO by the Industrial and Commercial Bank of China (ICBC), which raised almost HK$171.3 billion through its dual listing in Hong Kong and Shanghai.
"We don't expect any large IPO projects like the ICBC in 2007, though the strong IPO growth will remain in Hong Kong," said Terence Ho, an Ernst & Young partner for China IPO business.
In 2006, a total of 146.3 billion yuan in funds was raised through IPOs in Shanghai, compared with only 2.4 billion yuan in 2005 as the regulatory authority suspended fundraising on domestic markets to pave the way for its national stock reform.
Of the 14 IPOs in Shanghai last year, 46 percent concurrently issued both A and H shares, while 34 percent were listed companies with H shares that then issued A shares, the Ernst & Young report said.
"A plus H is the trend," said Raymond Ng, a partner at Ernst & Young's Assurance and Advisory Services, adding that many red chips are looking for ways to float shares in Shanghai in 2007.
PricewaterhouseCoopers expected the volume of new listings to hit 70 in Hong Kong this year. But the total capital raised may decline with the absence of mega deals like the IPOs of the ICBC and Bank of China, which together accounted for 62 percent of the total amount raised through IPOs in 2006.
Financial institutions, real estate, retail and consumer goods-related companies from China's mainland will be the key contributors to capital raised in 2007, according to the PricewaterhouseCoopers report.
(China Daily January 5, 2007)