Lawyers are predicting increased activity in the Hong Kong IPO market in the latter part of 2002, with the majority of listing activity expected to involve small and medium sized enterprises (SMEs).
Sheldon Xie, a partner at Stephenson Harwood & Lo, says: “The number of listings for this year looks certain to increase, especially following China’s WTO accession and the adoption of the CRSC’s (China Securities Regulatory Commission’s) attitude to encourage more private enterprises to list in the form of H shares in Hong Kong.”
But the increase in listings among private enterprises may not necessarily be a by-product of China’s WTO membership. Sidley Austin Brown & Wood partner Constance Hoy says: “The WTO just makes China a more market-orientated place but this should not have too much impact on the listing activity.”
Hoy adds: “A lot of the private enterprises that were to list in Shenzhen were encouraged to consider Hong Kong as an alternative.” Shenzhen failed to open the Hong Kong equivalent of the GEM Board (for high growth, high tech businesses) in 2001.
Barbara Mok, a partner at Jones Day, says: “We have observed a lot of interest and preparatory work going on among potential H-share IPO candidates since the beginning of the year, which is due to the fact that the long awaited second board of China has fallen through the cracks. So all the restructured private PRC companies want to come to Hong Kong instead.”
White & Case partner Olivia Lee has her own views of the rise in SME listings. She says: “The GEM Board has opened up huge opportunities for companies that haven’t met the profit requirements for the main board, because the main requirements for listing is two years of active business pursuit regardless of whether they are making a profit.”
Although there is no consensus as to why listings are to increase, all lawyers ALB spoke to agree that an increase in activity is likely towards the end of 2002.
Teresa Ko, a partner at Freshfields Bruckhaus Deringer, says: “After such a dull year last year we are expecting to see more activity, particularly in the second or third quarters. We don’t expect to see big ticket privatisations out of China, but there will be plenty of good companies with string earnings coming to the market.”
Ko adds: “If the CSRC is minded to relax its practice of giving a ‘no comment’ letter before privately owned enterprises can seek listing in Hong Kong, we could see a frenzy of listings.”