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Blue chip spinoffs may boost HK GEM board

HONG KONG: Plans by Cheung Kong group and Sun Hung Kai Properties to list Internet units on the Growth Enterprise Market (GEM) may jolt the second trading board out of the slumber it has been in since its November 1999 launch.

"This will be good news since these companies have good foundations to facilitate (their units') future developments," said Peter Wong, group managing director of Tai Fook Securities.

He said the support of major blue chip companies would speed up the development of the GEM for young and high growth firms.

Sun Hung Kai Properties has said it submitted an application to Hong Kong's stock exchange for a listing of its Sunevision Internet services unit on the GEM.

TOM.COM Ltd, an Internet portal owned 57 percent by Cheung Kong (Holdings) Ltd and its affiliate Hutchison Whampoa Ltd, was expected to raise HK$530 million by floating new shares on GEM at the end of February or in early March.

Prudential Portfolio Managers (Asia) regional director Andrew Look said investors are more willing to pay a premium in regard to such spinoff companies, adding: "They may not necessarily be profitable but it is much better than those companies that are unheard of before listing."

The Hong Kong stock exchange was also seen keen on boosting the market by speeding up work on the application of sizable technology companies, brokers said.

TOM.COM sumbitted its listing application to the GEM last month and a provisional hearing was set for February 3, much shorter than the usual waiting period of 25 business days, the South China Morning Post quoted sources as saying.

Lo Ka-shui, chairman of the GEM listing committee, said a waiver to the 25-day rule could be made if candidates did their homework. "If we are a drag on good quality companies' applications they might forego the GEM board and go to the Nasdaq," he told the South China Morning Post.

Blue chip spin-offs are not new to the GEM market. Shanghai Industrial Holdings Ltd listed its Chinese medicine unit SIIC Medical Science and Technology (Group) Ltd on GEM in November.

But most of the 10 companies listed on the secondary board so far have been small, unknown firms with short histories.

After an initial burst of speculative activity surrounding the initial listings of Timeless Software Ltd and SIIC, trading on the GEM board has quietened down.

In December the average daily turnover was HK$103.78 million, down 70.88 percent from November, according to statistics posted on the GEM website, www.hkgem.com.

On Thursday, the last day of trading before Friday's lunar new year's eve holiday, GEM turnover totalled HK$134.7 million, out of total Hong Kong stock market turnover of HK$17.86 billion.

Brokers said the GEM board has attracted little interest from major institutions and was volatile, with most trading focused on technology related counters.

For the time being it is still a speculators' market, Look said.

Eight of the ten GEM stocks were trading above their issue price.

Look said however: "The success of the GEM market will depend on whether the companies can make money and pay dividends to investors, not who are the bosses of these companies."-Reuters