China-related initial public floats to dominate Hong Kong in 1998
Donny Kwok
HONG KONG, December 28: Initial public offerings (IPOs) face a quiet first half in Hong Kong in 1998, with China-related issues expected to dominate the market and smaller firms finding it more difficult to list, analysts said.
IPOs rely on strong stock market sentiment. But expectations of a weakness in the Hong Kong market in the first half of the year are seen reducing buying interest in new issues, analysts said.
"I would expect a quiet (IPO) market in the first half because the Hang Seng Index is expected to be trapped in a narrow range," said Tony Yung, head of research of Tai Fook Securities.
"General market sentiment is bearish, liquidity for IPOs and placements may not be sufficient," Yung said.
Analysts expect the blue-chip Hang Seng Index to move in the 9,000 to 12,000-point range in the next six months. The index closed at 10,342.44 points, down 25.66 points or 0.25 per cent, on Wednesday ahead of the long Christmas break.
IPOs set records in Hong Kong in 1997 for number of listings and total funds raised despite a downturn late in the year.
Eighty-two companies sought listings in 1997, raising a total of HK$81.49 billion, compared with 49 new listings in 1996 raising HK$31.22 billion.
"We do not expect strong growth in the (Hong Kong) economy or in companies' earnings in light of generally weak sentiment in the Southeast Asia region, and that will affect IPOs," said Eugene Law, a director at Lippo Securities.
Analysts said quality stocks which were available at a bargain after the crash also distracted people from IPOs.
"I do not expect too many big issues in the coming year, but still, H-shares and red chips will continue to dominate. Hong Kong is still a main channel for them to raise capital," said Kinson Au, research manager at Asia Financial Securities.
H-shares are China-incorporated enterprises listed in Hong Kong. Red chips are Hong Kong-based firms with mainland Chinese backing.
Analysts said many Chinese enterprises were still hungry for capital for expansion following restructuring.
Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.
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