18 July 2008
China and Hong Kong IPOs to reach RMB250 bn and HK130 bn in 2008
The current weak market conditions and volatility in the international capital markets have cooled the IPO sentiment in mainland China and Hong Kong in the first half of 2008. According to a new PricewaterhouseCoopers (PwC) report, total IPO funds raised for the first six months ending 30 June 2008 amounted to RMB89.8 billion and HK$50.3 billion respectively in mainland China and Hong Kong. PwC predicts that the IPO funds raised in mainland China and Hong Kong will reach RMB250 billion and HK$130 billion respectively in 2008.
The number of IPOs listed in the first half of 2008 on the Shanghai Stock Exchange is 4 compared to 12 last year, with total funds raised amounting to RMB66.8 billion compared to RMB141.1 billion in 2007. Among the new listings, two of them were Ashares issued by H-share companies listed in Hong Kong. On Shenzhen Stock Exchange, where the new listings are dominated by small to medium sized enterprises, the number of IPOs rose to 54 from 38 last year, with funds increasing by 87% from the last corresponding period to RMB23 billion. The total funds raised in Shanghai and Shenzhen stock exchanges have decreased 41% for the first six months of 2008.
“Besides stock market volatility and China’s austerity measures, the heavy snow last winter and the recent earthquake have had certain impact on the economy. Many companies have chosen to postpone their flotation plans as they are not in need of cash and want to wait until market conditions improve,” said Charles Feng, PricewaterhouseCoopers Beijing Office Lead Partner.
“Investors will be increasingly cautious towards big IPOs under the uncertain capital market environment in the second half of 2008. However, there is still abundant capital supply in the market, therefore IPO activities should remain strong for small to medium sized enterprises,” said Frank Lyn, China Markets Leader of PricewaterhouseCoopers.
In Hong Kong, the total number of IPOs in the first half of 2008 is 23 as compared to 34 in the same period last year, with two of them listed on the Growth Enterprise Market (GEM). IPO funds raised amounted to HK$50.3 billion, representing a 51% drop from the same period last year. Retail, consumer goods and services dominated the new listings (43%) in terms of number, followed by industrials (29%) and information technology and telecommunications (14%). Although the IPO market in Hong Kong has slowed down in the first six months, the average deal size of the successful listings (excluding companies that raise funds of more than HK$10 billion) in this period rose 11% from last year to HK$2 billion.
“The Hong Kong stock market was volatile in the first half of the year due to some negative external factors including escalating oil prices, and the effect of the subprime crisis and credit crunch. Investors have also been very cautious in making their investment decisions. Therefore, IPO activities in Hong Kong have decreased in the first six months,” said Edmond Chan, Partner of PricewaterhouseCoopers’ Capital Market Services Group.
“We believe investors are still confident in the companies that have solid fundamentals, and we believe the focus will be on the retail, consumer goods and services, and mining and energy companies. Despite the challenging environment, Hong Kong will continue to be a major platform for Chinese and overseas companies to gain international exposure,” said Richard Sun, Assurance Partner of PricewaterhouseCoopers.
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