initial public offerings (IPOs) trading on American exchanges

Wednesday, December 28, 2011

China Eclipses US as Top IPO Venue

China has again outshone the U.S. as the top venue for initial public offerings despite steep share price falls on the mainland and Hong Kong stock markets, highlighting the shift in global financial activity from west to east.

Companies raised $73 billion from IPOs in Shanghai, Shenzhen and Hong Kong this year, according to Dealogic — almost double the amount of money raised on the New York Stock Exchange and Nasdaq combined.

Hong Kong retained its crown as the top bourse for the third year in a row, with $30.9 billion raised this year. That figure compares with $30.7 billion and $18 billion, respectively, on the New York and London stock exchanges.

The results belied much weaker deal flow on mainland and Hong Kong exchanges this year, as market turmoil forced companies to delay share offerings and, in some cases, call them off at the last minute.

The $73 billion they raised was less than half last year’s total, compared with a 6 percent decline in IPO fundraising on U.S. exchanges.

The U.S. last topped the IPO league tables in 2008.

Hong Kong’s benchmark Hang Seng index is also down nearly 20 percent this year and China’s main index in Shanghai has fallen 23 percent, making Chinese markets among the worst performing in the world.

Until recently, Hong Kong rarely attracted listings by companies outside of China.

But with western markets in a funk and the euro zone gripped by a sovereign debt crisis, the bourse has recently hosted a number of landmark IPOs by foreign groups including Prada (PRDSF), Glencore (GLCNF)  and Samsonite.

“The pipeline of deals is still very heavy in Hong Kong,” said Philippe Espinasse, author of "IPO: A Global Guide." “A lot of deals were delayed or failed to launch this year, which means next year should be fairly busy as long as we get a breather on the macro front.”

Companies raised more than $41 billion in Shenzhen and Shanghai, even as stock prices tumbled to three-year lows.

Chi-Next, a Shenzhen-based exchange for start-ups that is meant to be China’s answer to Nasdaq, raised almost $11 billion in total. That compares with about $15 billion raised in Shenzhen and $16 billion in Shanghai.

Foreign investment banks have, however, failed to capitalize on the mainland capital-raising boom.

Goldman Sachs (GS), the world’s leading equity bookrunner by volume, has not underwritten a single IPO on the mainland since 2009.

Chinese securities firms have fought hard to win market share from their Wall Street rivals, pushing down overall fee levels as a result. Chinese banks captured a combined 30 percent of the Hong Kong IPO market this year, the most since 2006, according to Bloomberg.

The average commission for underwriters in Hong Kong was just 2.2 percent of an IPO’s proceeds compared with 3.5 percent a decade ago.

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