Shanghai Stock Exchange to overtake Hong Kong counterpart in 2010

The Shanghai exchange will overtake Hong Kong in 2010 in terms of new share listings, says PricewaterhouseCoopers, adding that Shanghai's planned international trading board will accelerate that trend.

The international board that will allow foreign companies to sell shares denominated in the Chinese currency may help the Shanghai Stock Exchange (SSE) to raise up to Rmb300 billion ($43.95 billion) through initial public offerings this year, overtaking its Hong Kong counterpart, which is forecast to raise HK$300 billion ($38.96 billion), PricewaterhouseCoopers said yesterday.

In an effort to open up markets and lower the barriers to entry -- a move it hopes will attract overseas capital -- China is planning an international trading board in Shanghai, which PricewaterhouseCoopers believes will be launched by the second half of 2010.

"If the board starts at a good time with good market sentiment, it will give a big boost to the SSE and may even enable it to overtake the Hong Kong stock exchange," said Edmond Chan, a partner with the firm's capital market services group.

Excluding the contribution from the international board, the total funds raised through new IPOs in Shanghai will be Rmb250 billion, Chan told reporters at a press conference in Hong Kong. There will be 15 companies selling shares for the first time in Shanghai, he predicted.

A couple of weeks ago Ernst & Young gave an even more optimistic forecast, suggesting that the SSE may raise Rmb380 billion through 30 to 40 new IPOs in 2010, outperforming Hong Kong.

The Agricultural Bank of China (ABC) will reportedly seek a dual listing in Shanghai and Hong Kong this year, raising up to $35 billion, with 60% of the shares sold on the Shanghai bourse and 40% on the Hong Kong stock exchange.

Along with approximately 103 small- and medium-size companies that are expected to raise an estimated Rmb70 billion by listing on the Shenzhen bourses, the stock exchanges in China will see a combined Rmb320 billion worth of new share listings this year, according to PricewaterhouseCoopers.

That is much higher than the Rmb185.6 billion raised in the two markets in 2009.

Meanwhile, the firm projects that the total funds raised through new IPOs in Hong Kong may exceed HK$300 billion in 2010, supported by a continued flow of mainland companies going public.

Last year, new IPOs in Hong Kong were worth HK$243.7 billion and the number of new listings totalled 73.

"Although we expect that there will be more international companies coming to list on the Hong Kong stock exchange, Chinese companies will continue to dominate Hong Kong's new listings," Chan said. "There will be at least five IPOs conducted by mainland companies exceeding HK$10 billion," he predicted.

"The key drivers will come from the energy, natural resources and commodity sectors," he added.

The firm expects there will be 60 new listings in Hong Kong in 2010, including 55 on the main board and five on the Growth Enterprise Market (GEM).

One of them is Moscow-based aluminium group Rusal, which may become the first Russian company to go public in Hong Kong after the Hang Seng Index gained over 50% last year. The company, which is controlled by billionaire Oleg Deripaska, kicked-off a week of pre-marketing yesterday and plans to raise as much as HK$2.6 billion to start paying down its $14.9 billion of debt.

Rusal's massive debt prompted Hong Kong's securities regulators to delay the deal last year.

Also, American International Group, the insurer selling assets to repay a US government bailout, is expected to take its Asian life insurance unit, American International Assurance, public in Hong Kong in an initial share sale that could raise as much as $8 billion.

And Swire Pacific, a Hong Kong-based conglomerate with businesses ranging from beverages to airlines, may spin-off its property unit in an IPO of up to $3 billion.

"We are seeing the continuation of investment capital inflow into the Hong Kong capital market due to low interest rates and lack of investment channels for investors. We note that many potential listing candidates have commenced their IPO preparation work," Chan said. 

¬ Haymarket Media Limited. All rights reserved.
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