> Hong Kong
IPO fever helping to restore market confidence
By Liu Yi Yu (HK Edition)
Updated: 2009-07-25 07:15

HONG KONG: The latest spell of IPO fever continues in the city, as Beijing's largest cement maker BBMG raised $768 million Thursday while its shares are 770 times oversubscribed in retail placement.

Investors' taste for BBMG makes it the second largest IPO in Hong Kong by far this year: its placement is behind only China Zhongwang, an aluminum product maker which raised $1.26 billion in April, one of the largest IPOs in the world this year, (behind Visabrasil listed in Sao Paulo).

"The fever for building material makers is fueled by the mainland's massive construction projects hatched under the central government's stimulus scheme," said Castor Pang, chief strategist at Sun Hung Kai Financial.

While the building material industry is a beneficiary of the central government's stimulus package, the renewable energy sector will benefit from the government's determination to expand the clean energy industry. The government aims to reduce the country's reliance on traditional fuels.

That partially explains the enthusiasm for Amber Energy, a mainland clean energy provider whose shares were 1,247 times oversubscribed in raising a relatively small fund of HK$166 million. Shares of Amber Energy jumped as much as 80 percent from offering prices on its trading debut.

"Investors are buying concepts rather than companies," said Pang, adding that the concepts behind these shares are in line with government policy, which is the biggest selling point.

Shares related to preferential policy, domestic demands, energy and infrastructure would be most sought after, said the analyst.

Unleashed liquidity is also a contributor to the IPO frenzy, according to Linus Yip, analyst at Shanghai First Securities.

Sufficient capital flows and the recent stock market rally are favorable factors for new listings, Yip said.

The benchmark Hang Seng Index surged to 19,982 points on Friday, the highest level since the erruption of the financial crisis last year. The index has climbed an impressive 32 percent from the beginning of the year.

Though some fear the rally is driven by hot money rather than fundamentals, since economic conditions do not justify surges like the present one, Yip is optimistic about the outlook for IPO's.

"The IPO fever just started," Yip said, adding that the positive market sentiment is likely to stay for some time.

Investors who missed the chance to buy low during the financial crisis are now grabbing the IPO wave and taking advantage of the current boom to make money or at least cut losses, Yip said.

The market will see some big corporations seeking listings later this year, among which Minsheng Bank is expected to seize the largest bulk, according to the analyst.

In the meantime, some companies are planning listings, now that investor's confidence has been restored amid a flurry of successful IPOs. Nineteen companies have announced their IPO plans for the second half in Hong Kong.

Mainland iron ore miner Lung Ming, wind power operator Longyuan and Shanghai-listed insurer China Pacific have revived listing plans that have been put off since the financial crisis sent market sentiment sinking late last year. They expect to raise billions of dollars in Hong Kong this year.

A number of overseas companies, including palm oil producer Wilmar International Ltd and casino operator Las Vegas Sands Corp, are to submit their IPO applications in coming months if not days.

The IPO revival has made Hong Kong among the busiest of places for listings. According to Dealogic, in the first half of 2009, the Hong Kong Securities Exchange was the world's second most popular place for IPOs after Novo Mercado in Sao Paulo and ahead of the New York Stock Exchange.

A total of 18 companies listed in Hong Kong in the first half this year, raising an aggregate of $2.2 billion. PwC expects IPO funds raised in Hong Kong to reach as much as HK$100 billion by the year's end.

"We have seen an improvement in the second quarter of this year in the Hong Kong stock market as money is flowing back into stocks and as the risk tolerance level steadily improves on the back of hopes of a recovery in the second half of this year," said Edmond Chan, Assurance partner of PwC in Hong Kong.

"The newly resumed IPO in Shanghai Securities Exchange may impose some challenges to Hong Kong's IPO market," the analyst at Shanghai First Securities noted.

"But Hong Kong's equity market is open to international investors and more efficient in fund collection," Yip added.

(HK Edition 07/25/2009 page5)