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More Chinese companies raise funds in Hong Kong

Hong Kong's stock exchange has been the most active in the greater China region in hosting initial public offerings (IPOs) in recent years and average deal sizes are nearing US levels, PricewaterhouseCoopers (PwC) says.

It is a trend that is set to continue, Richard Sun, partner of PwC's Capital Market Services Group, said in a recent interview.

"With China's accession into the World Trade Organization, thereby introducing more competition to all industries in China, there are more China-based finance, telecommunications, energy, logistics and other companies coming to the capital market," Sun said. "They need more funds if they are to compete with foreign companies and they're choosing Hong Kong."

Last year, Hong Kong accounted for 73 percent of the new funds raised in greater China, while Shanghai accounted for 17 percent, Shenzhen 8 percent, and Taiwan 2 percent. That compares with Hong Kong accounting for 55 percent of the region's IPOs in 2003 and 48 percent the previous year.

"Shanghai's A-share market hasn't been performing well, so mainland companies are looking to Hong Kong to raise funds," Sun said.

The specter that the government could at any time offload its nontradeable shares onto the market has hurt the A-share market.

PwC said the average IPO size in the greater China region rose 69 percent last year compared with 2002. Companies in the region's capital markets raised US$17.16 billion last year, up from US$13.51 billion in 2002.

"This upward trend is a result of the continuing privatization of China state-owned enterprises and the emergence of medium-sized China privately owned enterprises," Sun said.

Sun said that last year, companies listing in Hong Kong raised funds worth US$12 billion, up from US$7.5 billion in 2003.

While that compared with US$50 billion raised in the US in 2004, the average size of a Hong Kong IPO last year of US$180 million was just slightly less than the US$220 million average size of US listings that year.

"We've narrowed the gap with the US, because we're getting the much bigger companies from China," Sun said. "They're all industry leaders."
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