City IPO rush underway amid global economic uncertainty
Updated: 2011-11-29 06:38
By Oswald Chen (HK Edition)
Listings start to pick up in a quiet year
Hong Kong is witnessing an IPO rush as many mainland and international firms scramble to raise new capital from the city's financial market amid an unstable global economic environment that is expected to continue in 2012.
International brands such as Graff Diamonds Limited and Baoxin Auto Group Limited are seeking to list on the local bourse to strengthen their businesses in the robust Asian market.
The London-based luxury jewelry maker is preparing to raise $1 billion in a Hong Kong IPO in 2012, according to a person familiar with the matter.
Baoxin Auto Group Ltd, a dealer of BMW and Jaguar brand autos on the mainland, is also seeking as much as $526 million in a Hong Kong share sale, according to a term sheet.
The company, based in Shanghai, plans to start trading on Dec 14, according to the terms. US luxury bag maker Coach is due to start its secondary listing in Hong Kong on Dec 1.
Hong Kong-based Chow Tai Fook Jewellery Group Ltd is kick-starting the IPO activities that may raise as much as HK$22 billion ($2.8 billion) in what could be Hong Kong's biggest initial public offering in 2011 as luxury-goods companies tap growing affluence on the mainland.
Other mainland companies are also gearing up their IPO activities. Mainland insurer New China Life Insurance Co Ltd has received commitments from four cornerstone investors for $780 million worth of shares in the Hong Kong tranche of its initial public offering, IFR reported on Monday, citing two sources with direct knowledge of the deal.
Mainland snack food provider China Lifestyle and Beverages Group Limited and specialty chemical provider China First Chemical Holdings Limited will also launch their IPO this week as the two companies seek to raise HK$542 million and HK$650 million respectively.
Hong Kong has been ranked as the top IPO market in terms of fund-raising over the past two years. In 2010, the local bourse raised $57.38 billion, which represented 20.2 percent of the global total IPO issuance amount, according to Ernst and Young data.
However, due to the lingering European debt crisis and the prospect of an economic recession in the US, global equity markets have witnessed severe volatility which has greatly tarnished investor confidence toward the IPO market in 2011.
According to Reuters data, the IPO issuance amount in Hong Kong this year from Jan 1 up to Nov 18, 2011 has slumped by 57 percent to $10.1 billion compared with the same period in 2010. Global IPO issuance amount also dipped by 39 percent to $145 billion in the same period.
From the beginning of 2011 up to now, at least nine companies have postponed their IPO activities that involved HK$57.6 billion.
Hong Kong Exchanges and Clearing Limited Chief Executive Officer Charles Li said earlier last week that the city may lose its ranking as the world's biggest IPO market in 2011.
"As the global equity market will be highly unstable in 2012 given the dim economic recovery prospect, more companies are ready to cash in the current stabilized market sentiment to launch their IPO activities so that they can raise more proceeds by getting a more favorable valuation," Kingston Securities Research Executive director Dickie Wong told China Daily.
Reuters and Bloomberg contributed to this story.
(HK Edition 11/29/2011 page2)