Under heightened compliance demands, legal advisors can serve the increasingly important role of gatekeepers. “IPO candidates can benefit from the pre IPO preparatory work provided by legal counsels to identify any legal and compliance issues. This will give them ample time to fix all these defects to ensure a smooth and swift listing process in the future. It will also help them get hold of the best IPO window,” says Deloitte’s Au.
Looking ahead, Deloitte China estimates that about 100 companies are expected to list at the Hong Kong bourse in 2012 to raise proceeds totalling about HK$230 billion ($29.68 billion). Among them, about 40 were IPOs planned in 2011 that were shelved because of market uncertainties.
Since stocks are traded at a discount in the down cycle, many public companies could become attractive targets, says Edmond Chan, a capital markets partner at PwC’s Hong Kong office.
Experts foresee more mergers and acquisitions in the coming year, particularly in China’s competitive solar sector, which has seen many players rushing for listings in recent years. “We are going to see market consolidation, and smaller companies will seek mergers in order to survive,” says Jun He’s Wang.
Besides, tapping the debt market is also a viable option. “We believe some companies will go for debt issuance at this volatile time to bridge their financing needs, so that shareholders’ interest does not get diluted significantly,” says Deloitte’s Au.
Key trends and challenges in 2012
Experts cite the following key trends to watch out for in 2012: The launch of RMB-denominated IPOs, more international listings in Hong Kong by way of secondary listings or introduction, more mainland enterprises tapping Hong Kong’s market to go global, and the Hong Kong bourse vying to become an international capital market for mining and natural resources enterprises.
The state of Hong Kong’s equity market will also hinge on the unfolding of the euro zone crisis, the quantum of China’s monetary easing policy, the elections and administrative changes in key countries, and aggressive competition from other bourses.
Hot sectors to watch out for
Mainland companies will continue to form the core of new listings as many Chinese enterprises are seeking funds to fuel expansions, and strive for better market share.
In particular, many firms reported having candidates from retail and consumers sectors in their pipeline who are eager to gain access to China, the world’s second largest luxury consumer market.
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