Retail investors help fuel Hong Kong market as analysts predict IPO boom

Retail tranches oversubscribed in early 2013 Hong Kong IPOs

Rising demand by retail investors has helped start off the year on a positive note for the Hong Kong IPO market, with six IPOs in January alone that showed success particularly in the retail tranches of the offerings, helping trim a backlog of companies waiting to make offerings through the exchange.

PanAsialum Holdings, which makes aluminum components for the iPad, raised HK$1.24 bn ($160 mn) in an IPO completed in Hong Kong this week, with the retail tranche oversubscribed by 50 times. The retail tranche was quadrupled in size from a 10 percent stake to a 40 percent stake in light of the unexpectedly strong demand.

The PanAsialum Holdings IPO followed similar success by Time Watch Investments, the Tan Wang and Balco watchmaker and retailer, which priced at the top of its indicative range to raise HK$810 mn. The retail tranche of the deal was boosted to 50 percent from 10 percent in the face of unexpectedly strong demand from retail investors.

Also in Hong Kong IPOs in January, Chinalco Mining Corporation International, the Peru-based unit of Chinese aluminum miner Chinalco, raised HK$2.93 bn in a Hong Kong IPO in which the retail tranche was some 25 times covered.

Increased demand from retail investors brings positive news to an IPO market that, according to analysts from PwC, is set to take off in 2013 with some 80 IPOs raising a combined total of $19 bn, compared with the 65 IPOs in Hong Kong last year that raised a total of about $11.6 bn.

In a report at the start of January, PwC also said a series of changes that relaxed many listing requirements, in combination with a backlog of companies waiting to make initial offerings, will help establish the Hong Kong IPO market.

‘We expect that more mainland based small and medium-sized enterprises will be listed in Hong Kong following the relaxation of listing requirements for H shares and the beginning of the conversion of B shares into H shares,’ said Edmond Chan, PwC Capital market services group partner.

‘More foreign enterprises will be encouraged to list in Hong Kong under the anticipated changes of secondary listing requirements. We expect to see a more active IPO market in the second half of 2013.’

Another PwC study, in November of last year, predicted that Asian markets such as Hong Kong and Singapore will increasingly take over the cross-border IPO market, which has traditionally been dominated by New York and London.

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