HK appetite for mainland firms' IPO on rise
(Xinhua)
Updated: 2004-06-08 15:48

Hong Kong stock market may experience another Chinese mainland firms' initial public offering (IPO) boom this year.

Major Chinese mainland dairy company Mengniu Dairy received 200 times oversubscription last Friday beyond market expectation.

Chinese mainland instant messaging company Tencent Holdings announced Monday its IPO to raise up to HK$1.55 billion (US$198.9 million).

"Marketing sentiment are improving," said Philip Wan from Core Pacific-Yamaich. He said due to the sluggish market in the recent months, investors are kept away from quality IPOs, and they are hungry for new issues.

In the past four months, market sentiments are so gloomy that some Chinese mainland companies have postponed their IPO plans or trimmed fund-raising targets. The on-line game operator Shengda network reduced its initial offering price by 15 percent when going public on NASDAQ last month. China Telecom sold 1.7 billion new shares, smaller than previous market expectation.

"Investors are not avert from mainland firms, but are more critic," said Sha Ming, CEO of Nanjing Sample Technology. The company issued 19.5 million shares at higher level of placing price and will be listed on the Growth Enterprise Market of the Hong Kong Stock Exchange on June 9.

With price/earning ratio up to 19, analysts said that investors' enthusiasm toward Mengniu Dairy are not related with the price, but the brand name and the food sectors aroused investors interest.

However, dealers say that the rising market interest on Chinese mainland companies is also related with recent full scale takeover war for Harbin Brewery Group between Anheuser-Busch and SABMiller, the world No 1 and No 2 beer producers. Anheuser's bid price is at 47.65 times of Harbin Brewery's 2003 earning.

"While Anherser said the bid price is justified, how about other mainland companies with only 10 plus price/earning ratios ?" asked one analyst, suggesting more room is available for "re-imagining" the value of Chinese mainland firms.

Market sources say that more Chinese mainland companies are planning tobe listed on Hong Kong Stock exchange, including insurance giant Ping'An Insurance.

According to Ernst & Young, 2004 will have another IPO boom as in 1998 with Chinese mainland companies being the major impetus.



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