Stellar year earns worldwide acclaim (hktdc.com)


	Hong Kong Stock Exchange has leapfrogged New York to be the world’s second biggest market for initial public offerings

Rising regional markets and a proven reputation will further benefit Hong Kong’s record-breaking financial performance, international analysts believe.

They say that economic indicators point to continued growth for Hong Kong Stock Exchange (HKEx), which last year surpassed New York as the second biggest market for IPOs (initial public offerings), after London.

In 2006, a staggering US$40 billion was raised through IPOs listed in Hong Kong – nearly twice that raised in 2005, and fuelled by mega-listings from the Chinese mainland. These included the biggest float in history – the Industrial and Commercial Bank of China (ICBC) share sale, 50 times over-subscribed - and the Bank of China, which together raised a total of US$27 billion.

Commentators around the world agreed that last year’s stellar performance cemented Hong Kong as a fund raising force to be reckoned with.

Leaping ahead

The results “tend to end the argument that Wall Street or London floats are needed when really large amounts are being raised,” wrote Malcolm Maiden in the Melbourne Age. In an article proclaiming HKEx’s potential as “the stuff of dreams”, Maiden added that Hong Kong “continues to offer the liquidity that is needed to make the float a success”.

William Foreman of Associated Press wrote that Hong Kong's big advantage is its solid legal and financial system that can handle big IPOs. He said Hong Kong had benefited from a new trend that involves the rise of regional markets, diminishing the importance of places like New York. “With the help of powerful computers and increasing liquidity, capital can easily zoom around the world, scouting for the best investments,” Foreman wrote.

Howard Chao, partner in charge of global law firm O'Melveny & Myers Asia/International, has advised many clients in the US on matters including venture investments. He agrees Hong Kong has proven itself as one of the leading markets in the world.

“HKEx boasts several attractions: it has a very good international reputation for strong liquidity, impartial supervision, and for improving the corporate governance of its listed companies,” Chao said. “Hong Kong also has a sophisticated understanding of Chinese companies, and has successfully helped a long list of Chinese companies raise a very large amount of funding.”

Mature market

Tse Kwok Leung, Senior Economist with the Bank of China, said Hong Kong’s market was already international, and recent successes have seen it develop even further. With the city also offering its Chinese neighbour a cheaper cost base, more simplified reporting, cultural synergies and geographical convenience, Leung said mainland firms may find they don’t need New York after all.

Nicholas Andrews, JP Morgan’s Head of Asia Pacific and Emerging Market Equities, says Hong Kong has strong liquidity, research, general market coverage and, critically, a broad retail following. “The market is a well respected, well regulated market which has evolved significantly over the past decade,” he said. “In short, Hong Kong provides all of the benefits in a one stop shop for most situations.”

According to PricewaterhouseCoopers (PwC), Hong Kong's stock market has established itself as a major international fund raising hub in Asia “for all its obvious advantages” - the free flow of capital, established regulatory framework, legal system and experienced finance professionals.

Growing importance

“We also see the growing importance of Hong Kong as the fund raising platform for Asia as the profile of international investors continues to diversify, and the inflow of capital coming from different parts of the world,” said Frank Lyn, PwC’s China Markets Leader. “In addition, given its close proximity to mainland China, many foreign investors will continue to seek an exposure in the burgeoning China market through Hong Kong.”

In further kudos for Hong Kong, influential financial and economic media Finance Asia gave five of its 2006 international awards to the ICBC IPO. The float, which was dual listed in Hong Kong and Shanghai, was awarded Deal of the Year 2006, Best Equity Deal, Best IPO, Best Privatisation and Deal of the Year-China. Publications The Asset, IFR Asia and CFO Asia have also highly awarded the ICBC deal.