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PwC: HK IPOs expected to boom this year

By GAO CHANGXIN in Hong Kong  (China Daily)

09:02, July 03, 2013

Hong Kong will be the world's third-biggest initial public offering market this year, with up to HK$150 billion ($19.3 billion) to be raised by as many as 80 companies, accounting firm PricewaterhouseCoopers LLP said on Tuesday.

That is almost double the HK$89.9 billion raised last year by 64 companies, the lowest since the financial crisis hit in 2009.

The market didn't get off to a good start this year. Only 23 companies went public in Hong Kong in the first half, compared with 32 listings in the first half of last year.

But Edmond Chan, a PwC partner in Hong Kong, said IPO activity will be much more intense in the second half.

"There are still ample funds in the market and the IPO pipeline remains strong because many companies are preparing their IPO filings," said Chan.

A total of HK$39.5 billion was raised in the first six months of the year, 28 percent more than in the same period last year, meaning that IPO sizes are getting bigger.

Hong Kong may even become the world's biggest IPO market this year if Alibaba Group Holding Ltd, the country's biggest e-commerce company, completes its listing there this year.

Ernst & Young LLP said the IPO could raise HK$100 billion. Alibaba Group hasn't made any public announcement on the timing or venue of a possible IPO.

Ernst & Young last week revised its Hong Kong IPO target down to HK$100 billion from HK$130 billion, in light of recent market volatility.

But still, a total of HK$200 billion could be raised if Alibaba Group completes its listing before the end of the year.

Many companies have postponed their IPOs in Hong Kong in the past month, chilled by a liquidity squeeze in China and the US Federal Reserve's plan to taper quantitative easing if the US economy revives.

Last week, the Nexteer Automotive Group, a car-part supplier formerly owned by General Motors Co Inc, delayed an IPO in Hong Kong that could raise as much as HK$2.5 billion.

On the same day, casino operator Macau Legend Development Ltd reduced its listing plan by half to raise $800 million.

"Companies decided to wait and see in the face of recent market turmoil," said Chan.

But he added that market sentiment will get better in the second half of the year, which will be favorable to medium to "mega-sized" IPOs.

Benson Wong, another PwC partner in Hong Kong, said while the quantitative easing withdrawal plan may hurt markets in the near term, it helps deflate asset bubbles in the long term and benefits the overall fundraising market.

In the mainland, more than 600 companies have been waiting to go public since last November, as regulators halted new listings to reform the country's IPO system.

That will benefit Hong Kong because many mainland companies may change their IPO locations.

"As the companies in the A-share IPO pipeline are still numerous, turning to other markets, such as the H-share market, is a good option," said Chan.

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