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2008-12-28 | All chapters

China knocked off IPOs top slot
Sundeep Tucker, Financial Times, 28th December 2008

Chinese stock exchanges raised just $22bn in initial public offerings in 2008. The slowdown means China will not finish the year as the leading centre for IPOs, falling behind New York for the first time since 2005.

Mainland companies last year raised $109bn on global exchanges, largely in Shanghai and Hong Kong. Forecasters, including Ernst & Young, tipped the same amount to be raised this year.

However, according to Dealogic, the data provider, IPOs of Chinese companies this year raised $14.6bn on the mainland and $7.4bn in Hong Kong – the lowest total for three years – plus $1bn on other global exchanges.

According to Dealogic, IPOs raised $25.4bn on the New York Stock Exchange, propelled by the $19.8bn listing of Visa in March, while $9.3bn was raised on the London Stock Exchange.

A total of 124 Chinese companies listed in 2008 compared with just 17 each in New York and London. The Dealogic figures assume there will be no further IPO activity this year.

Dealmakers in China and Hong Kong report pent-up demand for IPOs in 2009, though few expect a return to the heady days of 2007 when buyers bought stakes from owners at large valuation multiples.

Kester Ng, JPMorgan’s head of Asia-Pacific equity capital and derivatives markets, said: “IPOs will somewhat return in 2009 but will not experience the levels of 2006 or 2007.

“It will be a more subdued market, especially in the earlier part of 2009.”

Bankers said investors were likely to focus on secondary capital raisings in Asia, where they could acquire shares in companies such as banks at discounts, before being willing to consider possible new listings.

Beijing is expected to try to kickstart the moribund IPO market with the sale of state-owned assets.

This year’s four largest Chinese IPOs were of government-owned railway or energy assets, sectors that, with retail, healthcare and technology, are expected to provide further listings next year.

“Those companies that could IPO will be mostly larger cap stocks, and those which are leaders in their sectors,” Mr Ng said.

“Small caps are somewhat out of favour, and only the ones with very strong stories will be able to list.”