20000103

HK IPO market seen booming in new millennium

HONG KONG: Hong Kong expects boom times to return to its initial public offering (IPO) market in 2000, with technology and Chinese-related issues the focus of attention.

The market, dead in much of 1998 and early 1999, revived in the second half of last year, with investors regaining interest in Asia, and especially Internet or technology issues.

Thirty-one firms listed on Hong Kong's main board in 1999, compared with 32 in 1998 and 82 in 1997; and interest was strong enough for Hong Kong to launch its second board Growth Enterprise Market (GEM) in late 1999.

IPO funds raised in 1999 were about HK$18 billion (US$2.31 billion), excluding the government's blue chip Tracker Fund's HK$33.33 billion IPO in November. This was compared with about HK$5.95 billion in 1998, and HK$81.65 billion in 1997.

"This year, the IPO market will definitely be stronger than in 1999, especially in terms of the amount of funds to be raised," said Kenneth Liu, partner of Arthur Anderson & Co.

Investors were anticipating several big Chinese enterprises to list in Hong Kong in 2000.

Among the listing candidates, China National Petroleum Corp (CNPC) will market its US$7.2 billion IPO in January with a view toward launching before an OPEC ministerial meeting in March, market sources said.

Other Chinese candidates including China Unicom, China Petrochemical Corp (Sinopec) and CNOOC Ltd.

Three Chinese firms, so-called H-shares, listed in Hong Kong in 1999, compared with only two in 1998 and 16 in 1997.

"The coming H-shares will be much bigger in size," Liu said. "In 1997, the amount of funds raised was about HK$80 billion. The story may repeat in 2000."

Liu expects the total amount of funds to be raised in IPOs, including H-shares, to exceed HK$100 billion in 2000.

Local candidates include Mass Transit Railway Corp's HK$15 billion float and the Bank of China Group's HK$37.5 billion IPO.

Interest in smaller IPOs has rocketed since the debut of Hong Kong's GEM market in November. Seven companies listed on GEM in 1999, raising about HK$1.58 billion.

"GEM will be a main market focus with more technology and Internet-related firms queuing up for a listing," said Alex Tang, research director of Core Pacific-Yamaichi International.

Billed as a "buyer beware" growth stock market for informed investors, GEM aims to become a premier fund-raising arena for young small high growth technology firms in Asia.

"GEM will no doubt catch the market attention as some long anticipated Internet firms may seek a local listing," said Adrian Ngan, head of Hong Kong research of BNP Prime Peregrine.

The GEM market is being launched as Hong Kong's economy is showing increasingly strong signs of recovery and as technology fever is sweeping the territory following the Sino-U.S. deal on terms for China's entry into the World Trade Organisation.

The trade deal sent China Internet, telecoms and technology stocks soaring on hopes of a huge wave of foreign investment.

"The number of GEM listings is poised to jump. Supply of GEM firms may exceed investors' demand, and that may result in GEM companies offering their stocks at lower prices," Liu said.

Liu expects more than 20 companies to list on GEM in 2000.

Ricky Tam, head of research of Delta Asia Securities, said about 16 to 20 Internet-focused investment funds are expected to be set up in the U.S. early next year.

"Many overseas investment funds are expected to be set up early in the year, and that will give even greater support to technology-related issues," Tang said.

The stock exchange's co-listing deal with Nasdaq to bring top U.S. corporate names to Hong Kong will provide more choice to investors, raising awareness on tech-stocks, analysts said.

According to the co-listing deal last month, U.S. corporates such as Intel Corp, Microsoft Corp, Cisco Systems Inc, Dell Computer Corp and Applied Materials will come to the local market. The Nasdaq will start co-listing Hong Kong issues by the mid-2000.-Reuters