A spate of year-end listings by Chinese mainland companies, including the world's largest initial public offering (IPO), has catapulted Hong Kong into the eighth largest stock market globally in terms of market capitalisation, a rise of two notches from last year.

The total value of Hong Kong stocks stood at US$670 billion, a rise of 44 per cent from last year. The financial world is very excited about Hong Kong's prospects for 2004 as all factors point to the SAR continuing as the premier capital formation centre for mainland enterprises.

"Because of its status as one of the major financial centres and first class financial services, Hong Kong is the preferred venue for listings by mainland firms and this will continue," says Hong Kong Exchanges and Clearing (HKEx) listing committee member Alex Ko Pao-ming.

According to HKEx figures up to December, 42 new mainland companies had listed their shares on the main board of the Stock Exchange of Hong Kong this year. In addition, 26 new companies had listed on the secondary Growth Enterprise Market (GEM).

These figures excluded the mid-December IPO of the mainland's largest insurer, China Life Insurance Co, set to raise up to HK$23.6 billion (US$3.04 billion), which dwarfs all others and is the world's biggest in 2003. The second-biggest IPO in Hong Kong during the year was that of another insurance company, PICC Property & Casualty Co, that raised HK$6.22 billion (US$800 million).

Strong market support

Mr Ko says these results validate the fact that Hong Kong offers as good a valuation as New York, and sometimes as good liquidity.

"Compared with other bourses in Asia, Hong Kong's capitalisation and liquidity are much greater," he said. "A lot of investment funds have set up arms here. There is also a lot of market support that comes from brokerage houses and research analysts.
"Hong Kong is also superior because of the greater attention given here to smaller Chinese companies by analysts, the media and investors. Given Hong Kong's cultural affinity with the mainland there is of course a much better understanding of the China market by local investors. All this makes it an ideal place for mainland firms to list."

Other major IPOs this year were those of mainland enterprises Sinotrans; electricity-producer China Resources Power Holdings; cotton textile manufacturer Weiqiao Textile Co; car and aircraft manufacturer AviChina Industry & Technology Co; truck and sports-utility vehicle maker Great Wall Automobile Holdings Co; property developer Beijing Capital Land; retailer Lianhua Supermarket Holdings and steelmaker Baoye Group.

New companies listing on GEM included the second-biggest Beijing-based supermarket chain, Wumart Stores, Inc, which raised HK$547 million (US$70 million).

Economic recovery spurs new listings

In view of the recovering economy, Mr Ko, who is also chairman of investment bank Armstrong Capital, expects the number of new listings next year to surpass those for this year.

At present 68 companies have active applications to list in the near future, including 26 on the main board and 42 on GEM.
"Mainland enterprises from industrial, retail and technology sectors are likely to be the driving force for Hong Kong's IPO market next year,'' adds Mr Ko. Firms in the financial, manufacturing, infrastructure, construction and property sectors are also expected to list.

In the financial sector Mr Ko mentions Ping An Insurance, the mainland's second-biggest insurer, which is looking to raise HK$11.6 billion (US$1.49 billion) in the new year, and the private Minsheng Bank.

Among other likely candidates, China's largest chip foundry, Shanghai-based Semiconductor Manufacturing International Corporation (SMIC) is expected to seek to raise up to HK$7.77 billion (US$993 million).

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