China has become Hong Kong’s greatest contender for the position as the world’s largest IPO centre – in the words of financial analysts, “China is well-poised to surpass Hong Kong in 2010.”

According to reports released by both PricewaterhouseCoopers (PwC), domestic companies are expected to raise US$55.7bn on the Shanghai Stock Exchange this year, while in Hong Kong the figure is expected to be US$47.7bn. Last year Hong Kong raised approximately US$30bn in new listings with Shanghai tagging closely behind with US$27.3bn.

“The China IPO market, especially Shenzhen SME Board and ChiNext, has picked up significantly in the first half of the year, despite the uncertainties on global recovery and the Euro debt crisis impact causing greater market volatility. This really demonstrates that Chinese companies are developing well along with the continuing growth of domestic economy and become more mature,” said Frank Lyn, China markets leader of PwC in a statement.

Exemplifying so is the long list of IPOs launched on domestic boards in recent months; Industrial Securities (represented by Grandall and AllBright) recently listed on the Shanghai Stock Exchange for US$500m, so did Beijing Haohua Energy (represented by Zhong Yin), who listed in the same board to raise US$293m.

Domestic companies have raised RMB213bn from 176 IPOs in the first half of the year, more than the RMB187bn raised in the whole of 2009. And according to PwC’s predictions, the total number of new listings on the country’s two bourses in Shanghai and Shenzhen may reach 300 in 2010, compared to 99 last year.

Investor confidence is what Wayne Chen, partner and head of capital markets at Llinks, attributes to the booming local market. “There are many elements that have boosted investor interests in local listings. This includes the increasing listing value and the strict regulations of the China Securities Regulatory Commission (CSRC),” says Chen.

CSRC has been reputed to be extremely strict with its approval procedures and Chen explains that the authorities are requiring more than just meeting basic listing requirements but also a review of status of the company in its industry according to its peers. Such strict regulations have resulted in the local board being dominated by the top-tiers companies, which is both inviting and assuring to potential investors.

“This type of confidence, at this time, is a notion that is lacking in investors in international markets,” says Chen.

For the full feature on China’s IPO market, please keep an eye out for ALB China issue 7.7

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