The lackluster sentiment prevailing in the equity markets may deter mainland firms from testing the Hong Kong initial public offering (IPO) waters during the first half of this year, despite the impetus provided by the central government.
The government had reiterated in its latest Pearl River Delta blueprint that it would encourage companies to use the IPO route to secure financing.
Marketmen, however, opine that the unfavorable conditions would act as a deterrent for mainland companies.
Carmen Wong, corporate finance officer, Phillip Securities, said local investors are still cautious about placing orders in new listings.
"The market sentiment may rebound only in the second half when the overall economic conditions improve," she said, noting that the IPO market will remain tepid in the first-half.
Eugene Law, research head, CASH Asset Management, said the sluggish capital markets on the mainland and in Hong Kong have made fundraising more difficult.
This year, only two companies have been listed in Hong Kong. Strong Petrochemical made its trading debut after raising HK$250 million through an IPO, while China Singyes Solar Technologies raised HK$63 million.
"The current economic condition has dragged the IPO market," he said. "The big mainland companies need to wait for better times," said Law.
Although the central government has encouraged mainland companies to raise funds in Hong Kong, Law believes fundraising activity may pick up only in the third quarter.
Both Wong and Law believe that investors will remain bullish about those mainland firms that are set to benefit from the 4-trillion yuan stimulus package.
"Investors are still looking for quality Chinese companies," Wong said, noting that the construction sector will get more attention as a result of the stimulus boost.