The vibrant IPO market is only part of the reason for optimism on capital markets legal work. Another area where many firms have experienced heightened demand is follow-on offerings by Chinese companies, the US$493m follow-on share offering in Hong Kong of Hong Kong-listed China National Building Materials (CNBM) being the most recent example.

Recent statistics by Thomson Reuters show that at the beginning of September secondary offerings in China reached a record year-to-date level of US$25.6bn, up 54% from US$16.6bn for the same time period last year. Shanghai has superseded Hong Kong as the most active exchange for follow-on activity this year, its 25 offerings raising a total of US$12.2bn.

While the secondary offerings that now inundate the market are indicative of both a robust economy gaining pace and growing investor confidence, some lawyers have observed that potential M&A opportunities may be the driver of many follow-on offerings.

"Domestic companies have become more sophisticated and increasingly active in expansion and investment. Large listed companies in particular have huge demand for raising new capital through follow-on issuances to strengthen their balance sheet and fund future expansion and development," said Zheng Xiaodong, partner of Jincheng Tongda & Neal (JT&N) and a former Norton Rose lawyer. "Given that M&A opportunities are abundant in the current market, some companies are eager to gain the capital they need for making acquisitions or preparing for such opportunities in the future."

In addition to Shanghai-listed large companies, small to mid-sized enterprises listed on Shenzhen Stock Exchange have also been active in secondary offerings. During the first eight months of 2010, a total of US$3.5bn was raised through follow-on issuances in Shenzhen, while US$8.5bn was raised in Hong Kong. ALB

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