A late-year spurt of new share issues in Hong Kong is expected to extend into 2004, as the city plays host to capital-hungry mainland firms and investors craving their shares, according to a forecast released yesterday.

"Hong Kong's IPO activity will remain active in 2004 given there is no bad news, such as SARS or terrorist attacks," said Richard Sun, a partner at the leading auditing firm Price-waterhouseCoopers.

"More Chinese firms will seek listings in Hong Kong. Their nature will be more diversified and the size of their offerings will be increasingly massive," said Sun.

Funds raised from Hong Kong IPOs could reach HK$100 billion (US$12.8 billion) next year, with up to 80 per cent of that from mainland-based financial and insurance firms waiting to tap international capital markets, Sun predicted.

Offerings from mainland air carriers, electronics and telecommunications firms, as well as Hong Kong government projects, such as the proposed listing of the airport authority, would contribute the remainder.

Sun added that about 100 firms are expected to go public in the territory's main and second boards next year.

The forecast total would be up sharply from this year's HK$58.95 billion (US$7.56 billion) raised despite dampened demand in the first-half due to the deadly SARS epidemic.

New equity issues regained momentum in the latter half of 2003, with several mainland issues taking centre stage.

One of those was China Life Insurance, which ended at HK$6.40 yesterday, up 78 per cent from its issue price of HK$3.59 earlier this month.

Many investors seeking to cash in on China's booming economy are scooping up H-shares - Hong Kong-listed Chinese firms that derive the bulk of their earnings on the mainland - boosting the H-share index of Chinese enterprises to new highs.

The index ended up 2.57 per cent, or 122.21 points at 4,883.33 yesterday, and is up a hefty 145 per cent this year alone.

The recent China frenzy sparked fears of a brewing bubble in the market. But Sun dismissed such worries, saying the quality of many mainland corporates has been improved.

"Unlike the tech firms, many Chinese companies have solid business. Their earnings are also supported by huge domestic demand from China," he said.

Reuters

(HK Edition 12/31/2003 page7)