Hong Kong Exchanges and Clearing (HKEx) will become one of the major stock exchanges in the world with a high concentration of mining and natural resources companies. In the next 12 months there will be another 10 to 15 mining and natural resources-related companies listing on the exchange, predicts PricewaterhouseCoopers (PwC).
The number of mining and natural resources-related IPOs increased from three in 2008 to 13 in 2009 and the funds raised increased by over 140 times. This year (until October 26), there have been seven mining and natural resources-related listings, raising a total of HK$36 billion ($4.6 billion), according to the firm.
In all, 63 new companies have listed in Hong Kong so far this year, raising a combined $44.8 billion, according to Dealogic.
“Strong fundamentals on the demand side and restrictive new supply suggest that the sharp U-turn during 2009 by the global mining industry is a trend that is likely to continue in 2010 and beyond,” Tim Goldsmith, PwC’s global mining industry leader, said in a statement released on Tuesday.
“China is a key consumer of mining commodities and the growth in that country is spurring the largest increase in mineral demand since the industrial revolution,” he said.
There are currently over 250 mining and natural resources-related companies listed on the Hong Kong stock exchange. The market capitalisation of the companies in this sector has increased more than 35 times since 1999, according to PwC.
PwC notes that the HKEx has made a huge effort to attract overseas mining and natural resources companies to list in Hong Kong. The bourse also helps mainland mining companies to raise funds from foreign investors, making it a great listing platform for the mining and natural resources sector around the globe.
In terms of mergers and acquisitions activity, natural resources are the main industry target for Chinese investors overseas. Some 14 major resources deals were announced in the first half of 2010, the largest being Sinopec’s $4.7 billion acquisition of a 9% stake in Syncrude from ConocoPhillips.
Another notable acquisition was China Investment Corporation’s double investment in PennWest Energy which amounted to $1.2 billion in total.
While Australia is identified as the main target destination, Africa is growing in prominence for Chinese resources investors. “Natural resources continues to be the priority industry M&A target for Chinese investors overseas, a trend that is in line with the nation’s need for resources to support the engine of economic growth,” Goldsmith said.
“Chinese companies are looking for resources assets to fulfil its insatiable demand and to secure long-term supply. Despite the sharp fall in deal values in 2009, Chinese investment was notably strong, accounting for three of the top 10 deals by value last year. We are confident the upward trend will continue into next year,” said Benson Wong, an assurance partner at PwC Hong Kong.