Wednesday 25 March 2009
Big mainland IPOs may be a thing of the past
The initial public offering market in Hong Kong will be largely played out in the next two or three years since most of the mainland’s large, quality companies have already sold shares in the 16 years since the door to overseas listings opened, according to Henry Cai, the chairman of investment banking in Asia at UBS.
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Big mainland IPOs may be a thing of the past
Wong Ka-chun
25 March 2009
The initial public offering market in Hong Kong will be largely played out in the next two or three years since most of the mainland’s large, quality companies have already sold shares in the 16 years since the door to overseas listings opened, according to Henry Cai, the chairman of investment banking in Asia at UBS.
“Nearly 90 per cent of China’s big and good names have secured listing status either in Hong Kong or other bourses across the world. It will be a difficult task for us in the coming years, but I think it would be a lesson for us to learn how to find the good ones,” said Mr. Cai.
Hong Kong has raised US$200 billion and attracted more than 300 mainland enterprises since the first batch of nine state-owned enterprises went public in 1993.
In 2007, global share sale activity reached a record high of US$287 billion through 1,979 deals. That year, Hong Kong became the world’s second-largest market for initial share offers with 84 issues that raised HK$590.4 billion.
The listing boom helped investment bankers enjoy rich harvests in 2006 and 2007, but they faced a sharp contraction in share offers in 2008 as the credit crunch and the global economic slowdown diminished supply.
“I think the first half is still tough for us but it will turn positive in the second half,” said Mr. Cai.
He said last year was a difficult time to determine prices as investors shied away from new offerings.
So far this year, only five companies have picked the Hong Kong stock exchange as their listing bourse this year, half the number of transactions compared with the same period last year.
Mr. Cai said mainland firms would be the top buyers of assets worldwide in coming years given their high growth prospects and ample cash.
Meanwhile, he said, the return of Hong Kong red chips to Shanghai or Shenzhen through domestic share sales was unlikely to materialise in the near term.
“A lot of mainland companies are waiting for domestic listings, and I think Beijing authorities will handle their cases first,” Mr. Cai said.
After establishing a well-connected equity market platform over the past two years, UBS was aggressively spending more resources on creating a strong platform for bond underwriting and merger and acquisitions on the mainland this year, he said.
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