IPO Boom Expected In Hong Kong This Year

by Mary Swire, Tax-News.com, Hong Kong

05 June 2002

The Bank of China (BOC) is likely to launch its long-awaited share issue in Hong Kong next month, and local investment bankers are expecting the issue to be the signal for a flood of share offerings in the second half of the year, as mainland firms take advantage of improving conditions in the global economy.

BOC's planned US$2 billion to US$2.5 billion share offering was delayed following the market downturn last year. In October BOC merged its ten Hong Kong operating units to form Bank of China (Hong Kong), in anticipation of a joint New York and Hong Kong listing, but later scrapped plans for a full New York listing to reduce regulatory complexity. Even the Hong Kong listing has been scaled down from original estimates of up to US$5 billion.

The merger between the Hong Kong branch of the BOC and nine other BOC units created Hong Kong's second largest bank, with HK$820 billion (US$105 billion) in assets putting it in second place behind HSBC with HK$1.71 trillion.

Other major deals in the pipeline include China Telecom, expected to go for US$5 billion, mainland insurer Ping An Insurance, hoping to raise US$1.2 billion, and China Unicom, wanting US$5 billion to fund an acquisition spree.

Arthur Andersen partner Kennedy Liu Tat-yin told the South China Morning Post that between 200 and 250 companies were preparing plans to list within the next 18 months. "The IPO market is starting to get more active. We haven't seen high-quality mega-sized share offerings for more than a year. Now a lot of applications are gaining pace," Mr Liu said.

In the past five months, US$528.9 million has been raised through the listing of 46 companies, but Mr Liu expects that more than US$13 billion will be raised through IPOs this year.

Analysts expect Asian markets to benefit from stagnant conditions in European and US markets which are encouraging investment managers to look elsewhere. China's post-WTO liberalisation, together with improving economies in the region are leading major funds to increase their weightings for Asian assets, and Hong Kong is sure to be the beneficiary of any such trend.

Recommended