Still on top

Fund flows from the main­land sup­ported by pol­icy moves

China Daily (USA) - - FRONT PAGE - By LIN WENJIE in Hong Kong cher­rylin@chi­nadai­lyhk.com

Hong Kong is ex­pected to re­main the world’s hottest mar­ket for ini­tial public of­fer­ings thanks to the large amounts of money raised by main­land banks.

Hong Kong is ex­pected to re­main the world’s largest ini­tial public of­fer­ing mar­ket in 2016, backed by the large amounts of money raised by Chi­nese main­land fi­nan­cial ser­vices in­sti­tu­tions, ac­cord­ing to the new re­search re­port from global au­dit and ad­vi­sory firm Deloitte.

The ad­vi­sory firm fore­cast a to­tal of 115 IPOs rais­ing about HK$200 bil­lion ($25.8 bil­lion) for the en­tire year of 2016 in Hong Kong. Both of the fig­ures will be less than last year, af­fected by the likely in­ter­est hike from the US Fed­eral Re­serve, the slow­ing down of the Chi­nese econ­omy, and the un­cer­tain­ties brought by the US elec­tions and Brexit.

De­spite the gloomy global en­vi­ron­ment, Hong Kong still main­tains its place as the world’s largest IPO mar­ket in the first three quar­ters. Sta­tis­tics showed that there were 71 IPOs in Hong Kong mar­ket in Jan­uary through Septem­ber, rais­ing about HK$136.4 bil­lion. No­tably, 84 per­cent of the funds raised were from Chi­nese main­land fi­nan­cial ser­vices in­sti­tu­tions, a sig­nif­i­cant jump from 49 per­cent last year.

Deloitte be­lieves that cap­i­tal in­flows to the Hong Kong mar­ket will con­tinue to in­crease in the fourth quar­ter, af­ter the ren­minbi was added to the In­ter­na­tional Mon­e­tary Fund’ s Spe­cial Draw­ing Right (SDR) bas­ket, and in­vest­ment from main­land’s in­sur­ance com­pa­nies was al­lowed by the Shang­hai-Hong Kong stock con­nect.

“There are three to four jumbo IPOs planned for the Hong Kong mar­ket in the lastquar­ter, in­clud­ing a se­cu­ri­ties group and a phar­ma­ceu­ti­cal group, each tar­get­ing to raise at least HK$7.8 bil­lion, so Hong Kong is go­ing to see its IPO lead­er­ship fur­ther ce­mented,” Ed­ward Au Chun-Hing, co-leader of the Na­tional Public Of­fer­ing Group at Deloitte China said.

In com­par­i­son to Hong Kong’s strong grow­ing mo­men­tum in the fourth quar­ter, I PO ac­tiv­i­ties in Shang­hai and Shen­zhen are an­tic­i­pated to be sta­ble due to ef­forts by the au­thor­i­ties to reg­u­late the stock mar­ket, even though there are some en­cour­ag­ing de­vel­op­ments, in­clud­ing MSCI’s cre­ation of 20 in­dexes that in­clude A-shares, the up­com­ing launch of Shen­zhen-Hong Kong Stock Con­nect, and the ren­minbi’s in­clu­sion in SDR.

By the end of the third quar­ter, both Shang­hai and Shen­zhen mar­kets to­gether will have com­pleted 120 IPOs, rais­ing about 74.9 bil­lion yuan ($11.3 bil­lion), both fig­ures sig­nif­i­cantly re­duced from the same pe­riod of last year. Shang­hai’s IPO mar­ket ranked the third glob­ally, fol­low­ing by that in New York, but the Shen­zhen mar­ket dropped out of the top five rank­ings.

Deloitte forecasts that about 180 to 220 IPOs will be com­pleted to raise 86 to 106 bil­lion yuan in the A-share mar­ket by the end of 2016.

“The in­tro­duc­tion of a reg­is­tra­tion-based sys­tem for new shares is post­poned in the main­land mar­ket, and many IPOs in the fourth quar­ter will still be some man­u­fac­tur­ing and tech­nol­ogy com­pa­nies with small and medium scale, so we be­lieve the main­land’s IPO ac­tiv­i­ties are likely to­move in a sim­i­lar di­rec­tion and pace as ear­lier this year,” said Au.

...so we be­lieve the main­land’s IPO ac­tiv­i­ties are likely to move in a sim­i­lar di­rec­tion and pace as ear­lier this year.” Ed­ward Au Chun-hing, co-leader of the Na­tional Public Of­fer­ing Group at Deloitte China

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