In 2003, mainland companies raised US$7.6 billion in Hong Kong, a figure that is expected to almost double this year, according to financial consultants PricewaterhouseCoopers. 

In addition, shares prices in the index of Chinese mainland-listed companies (or H-shares) almost trebled in 2003 as investor interest in China-linked firms soared.

PWC partner, Richard Sun, said Hong Kong remained the number one choice for listings, despite efforts by New York and London to attract more mainland companies. Experience and infrastructure are the key to Hong Kong's success, he said.

"The rules and regulations are well established and understood in Hong Kong. All the professionals here know how to handle these issues. Also, with no restrictions of foreign exchange and a simple tax system, it is an attractive place for foreign investors and fund managers to invest in H-Shares," said Mr Sun.

Mark Machin, head of Asian Capital Markets for Goldman Sachs agrees. "Hong Kong has the most vibrant market for IPOs because of the open nature of its market which allows all types of investors, local and international, professional and small retail, to participate in offerings.
 
"This is a major competitive advantage over many other more restrictive markets in the region," Mr Machin added.

2003 was strong, but 2004 looks even better

The tone was set in the opening days of 2004 when Chalco, China's aluminium giant, completed a record stock placement through the Hong Kong arm of international brokers, CLSA.

Fund managers are expecting similar success from other major listings penciled in for 2004. Upcoming listings favour consumer industry players and financial services, as mainland companies in these sectors mature and seek international exposure.

The move comes as no surprise to Hong Kong's financial professionals. "Hong Kong has 10 years experience in raising capital. Initially the stocks were heavy industry, but now we see more variety. One of the biggest sources [in 2004] will be banking and insurance," said Mr Sun.

This swing was signaled in December with 2003's largest IPO, the US$3.04 billion flotation of China Life Insurance. Other major Chinese banks are expected to follow, including the fast-reforming China Construction Bank and the Bank of Communications, one of China's oldest financial institutions, and the smaller Minsheng Bank.

Other expected listings include the Chint Group, the mainland's largest manufacturer of low-voltage electrical components and Air China, which analysts predict is looking to raise US$1 billion this year.

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