IPO deals slump on mainland bourses

New York replaced Hong Kong as the world's top venue for initial public offerings in 2012, a report said on Tuesday.

The Chinese mainland stock markets in Shenzhen and Shanghai also ranked only fifth and ninth in attracting new listings because of a cooling economy, according to the report by accounting firm Deloitte Touche Tohmatsu Ltd.

Hong Kong, facing slower IPO activity in the first three quarters and tougher competition from other bourses in the Asia-Pacific region, lost its distinction as the world's largest IPO destination, which it had held for three years.

The city fell to fourth place with 62 IPOs and HK$89.8 billion ($11.6 billion) in fundraising volume in 2012. It had 90 new listings and HK$271.4 billion in listing proceeds in 2011, the report said.

The Shenzhen and Shanghai bourses registered 154 new listings and a combined 103.4 billion yuan ($16.6 billion) in 2012, a drop of 45 percent and 63 percent year-on-year.

"Without any heavyweight listings, the IPO funds raised by the two exchanges shrank significantly year-on-year. As a result of lower valuation for A-share IPOs stemmed from market transformation and weak corporate earnings, their respective IPO proceeds can only trail those of Hong Kong," said Edward Au, co-leader of national public offering group Deloitte China.

"The Bursa Malaysia surpassed the Shanghai Stock Exchange with proceeds from two mega-deals: Felda Global Ventures and IHH Healthcare, the fifth- and sixth-largest global IPOs of the year," he said .

Although Hong Kong had two large IPOs, from Haitong Securities Co and the People's Insurance Co (Group) of China, its listing performance was still behind that of the Tokyo Stock Exchange, which had the re-listing of Japan Airlines, the second-largest IPO worldwide in 2012.

"The poor performance of the A-share market and low evaluation of shares have forced many companies to reconsider their listing plan in the Chinese mainland," said Wang Hu, an analyst from Guotai Junan Securities Co Ltd.

The A-share market edged up only 3.17 percent in all of 2012.

"It is hard to not link the stock market performance to the low IPO amount, and because of the A-share market slump, IPO applications in the Chinese mainland have been in a de facto state of suspension since October," said Zhang Qi, an analyst at Haitong Securities Co Ltd.

While optimistic about the Hong Kong stock market's outlook, analysts are less bullish about Chinese mainland bourses.

The report added that in 2013, Hong Kong will continue to be the major fundraising hub for mainland companies, the majority of new IPOs coming from small and medium-sized mainland companies, while more international companies are expected to list in Hong Kong.

Hong Kong is also expected to see 70 to 80 new listings, raising around HK$100 billion to HK$150 billion, it said.

"The China Securities Regulatory Commission, China's top securities regulator, has decided to lower requirements for domestic companies to launch IPOs in Hong Kong, and this will make it more attractive in IPO applications and help raise more capital in the market this year," Zhang said.

More than 800 companies in the Chinese mainland are lining up for IPO approval from the commission, but Haitong does not see any sign of regulators restarting the IPO approvals before March, Zhang added.

Wang, of Guotai Junan, said: "The A-share market has bottomed out, but we don't see a strong rebound." Although investors have shown confidence toward economic reform and development under the country's new leadership, the macro economy will be stable and not rebound, he added.

Wang said he expected policies that drive urbanization and domestic demand will heat up the economy, especially in the retail, infrastructure and investment-related sectors. And given the low level of share prices, there is room for growth, he added.