List­ings: Cau­tious in­vestors keep away

China Daily (Canada) - - BUSI­NESS -

Hong Kong’s stock mar­ket has been volatile this year. The key Hang Seng In­dex peaked early in the year, reach­ing 23,340 points on Jan 2. It neared 21,000 twice in Fe­bru­ary and March and was back near 23,000 at the end of May.

Th­ese months didn’t see much IPO ac­tiv­ity. Statis­tics from the stock ex­change show there were 62 new list­ings from Novem­ber through Jan­uary but only 12 for the three months ended in April.

“There is a ‘short China’ theme,” Law said. “At the mo­ment, in­vestors are not will­ing to buy main­land com­pa­nies ag­gres­sively. Hong Kong lo­cal funds have been avoid­ing main­land stocks.”

“After decades of high-speed in­vest­ment­growth, there must be some bub­bles in China— not just fi­nan­cially, but eco­nom­i­cally,” Law added. “The risk is mount­ing, es­pe­cially in the real es­tate sec­tor.

“At some point, the bub­bles will bust— most likely, main­land and Hong Kong prop­erty mar­kets will col­lapse to­gether. Be­fore that pres­sure is re­leased, in­vestors will need to re­main vig­i­lant and be pru­dent ... we need to see signs of delever­ag­ing first.”

Ac­cord­ing to a re­port re­leased by the Hong Kong In­vest­ment Funds As­so­ci­a­tion in­May, only 17 per­cent of fund man­agers sur­veyed rec­om­mended be­ing over­weight in greater China eq­ui­ties, com­pared with 60 per­cent at the be­gin­ning this year.

The sur­vey also found that 66 per­cent of fund man­agers are tak­ing a neu­tral stance on “China con­cept” stocks, com­pared with 30 per­cent in Jan­uary.

“The Hong Kong stock mar­ket has lost steam,” said Bruno Lee Kam-wing, ex­ec­u­tive com­mit­tee mem­ber of the HK­IFA. “The slow­down of China’s eco­nomic growth is within ex­pec­ta­tions. But fund man­agers are cau­tious about the sec­ond quar­ter.

“In­vestors are on the fence as they wait to see whether China’s re­form poli­cies func­tion as well as de­signed. If the re­ac­tion is pos­i­tive, given the low mar­ket val­u­a­tions, we are likely to see a re­turn of con­fi­dence in the third quar­ter. ”

“The sec­ond and third quar­ters are tra­di­tion­ally quiet pe­ri­ods for IPO ac­tiv­i­ties in Hong Kong. We aren’t con­cerned enough to re­vise down our an­nual fundrais­ing fore­cast of HK$200 bil­lion,” said Louis Lau, part­ner of the Hong Kong cap­i­tal mar­kets group of KPMG China.

“Cur­rently, there’s no sup­port in the mar­ket for ‘mega’ IPOs of more than HK$10 bil­lion. But we see a strong pipe­line ahead.

“De­mand for smaller IPOs of HK$500 mil­lion to HK$1 bil­lion is fine. In the fourth quar­ter, which is usu­ally the peak sea­son, there could be two to three mega of­fer­ings.”

“We look for­ward to the ben­e­fits of some of the Chi­nese re­form mea­sures and the mini-stim­u­lus pro­gram un­veiled most re­cently,” said Ed­ward Au, co-leader of the pub­lic of­fer­ing group of Deloitte China, in a re­port pub­lished in April.

“The IPOs in the wings will shore up Hong Kong’s IPO mar­ket to raise HK$170 bil­lion to HK$210 bil­lion in pro­ceeds out of 85 to 100 IPOs for the full year of 2014.” Con­tact the writer at em­madai@chi­nadai­lyhk.com

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