2010 Hong Kong IPO fund-raising size achieves HK$445bn record

SMEs lead in 2011 as they want to take the opportunity to secure investment funds from a HK listing to expand their business.

Hong Kong has maintained its position as the largest listing market by fund-raising size in the world, with about HK$445 billion raised in 2010 - a record high. Chinese and foreign companies wanting a slice of the capital inflows into the city are behind the surging Hong Kong IPO market, and this trend looks set to continue. 

For the past decade, Pricewaterhouse Coopers (PwC) has had a front seat to the Hong Kong capital markets, with the firm having been involved with over 42% of the IPOs raising funds totalling HK$760.1 billion since 2001, according to a Pricewaterhouse Coopers report. 

Despite market volatility weighing on pricing and post-IPO performance, there is no shortage of investors wanting to tap into the Hong Kong capital markets. PwC predicts Hong Kong will continue to be amongst the top IPO rankings again in 2011, with around HK$300-HK$350 billion likely to be raised from 110 new IPOs mostly being made up of SMEs. 

“We see more and more SMEs wanting to take the opportunity to secure investment funds from a Hong Kong listing, as they are keen to expand their business. In addition, Chinese SMEs are keen to expand their brands overseas, and they view Hong Kong as the ideal platform for this international reach,” Benson Wong, Assurance partner of PwC said. 

The total funds raised through IPOs in Hong Kong were 79% more than in 2009 (HK$248.2 billion). The number of IPOs totalled 114 last year, increasing by 56% compared to 2009. Among the 114 companies that listed in 2010, 107 are on the Main Board (2009: 68) including 87 newly listed companies with funds raised (2009: 60), 8 introductions (2009: 4) and 12 transfers of listings from the GEM Board to the Main Board (2009: 4), and 7 on the GEM Board with funds raised (2009: 5). Excluding the transfer of listings from the GEM Board to the Main Board, the number of IPOs totalled 102 this year, increasing by 48% compared to 69 in 2009. 

In 2010, the IPO funds raised in Shanghai was RMB180.2 billion (HK$211.8 billion), an increase of 44% compared to 2009 RMB125.1 billion (HK$142.1 billion). While Shenzhen Stock Exchange’s total funds raised was HK$350.5 billion (RMB 298.1 billion), an increase of 375% (HK$71.3 billion) (RMB 62.8 billion) from 2009. 

“Investors are keen on China related projects as they continue to chase higher and more sustainable returns that are more likely to be achieved with a strong and growing Chinese economy and with a government ideology that favours Chinese companies investing overseas to grow their businesses. Of the total IPOs listed this year, majority of them continues to be China related companies,” said Benson Wong, Assurance partner of PwC. 

PwC expects there will be 110 new listings in 2011 including 100 on the Main Board and 10 on the GEM Board, while the total capital raised around HK$300-350 billion. 

“As long as the market continues to have strong liquidity and with China’s strong economic development as a backdrop, investors will remain positive of the IPO market outlook. Investors still have the appetite for IPOs,” said Edmond Chan, Assurance partner of PwC. 

“We also expect to see more overseas companies coming to list on Hong Kong Stock Exchange. Out of the 114 IPOs last year, 7 are overseas companies. Chinese companies will continue to dominate Hong Kong's new listings with key drivers being consumer goods and the retail sector, industrial products, financial services, mining, energy & natural resources related industries in 2011,” Mr Chan concluded.