Mainland companies remain engine for IPOs in HK: KPMG

Initial Public Offering (IPO) transactions in Hong Kong are expected to continue to grow steadily with Chinese mainland companies as the main engine, according to analysis released by KPMG on Tuesday.

Funds raised through IPOs totaled 39.5 billion Hong Kong Dollars in the first half of the year, up 27.8 percent from the same period in 2012.

"The market is expected to remain volatile but there are a couple of factors favorable to the IPO market in Hong Kong such as the relaxation of the regulatory requirements for H-share listing of mainland companies," said Paul Lau, Partner of KPMG China.

The China Securities Regulatory Commission last December relaxed the criteria and simplified the approval procedures for overseas share issuance and the listing of Chinese mainland enterprises.

KPMG expects a few privately-owned enterprises to obtain the commission's approval under the new rules and become listed in Hong Kong this year. The deals are expected to be mainly small to medium-sized, with potentially a new wave of medium-sized IPOs in the pipeline for 2014.

The recent credit tightening in the mainland may also prompt more Chinese lenders to raise funds through IPOs in Hong Kong, according to KPMG.

Beijing's continuous efforts to facilitate the internationalization of the yuan will encourage more Chinese enterprises to launch yuan-denominated IPOs in Hong Kong, the KPMG analysis noted.

"While in the first half of the year the New York Stock Exchange secured a comfortable lead in terms of IPO funds raised among global stock exchanges, we expect there will be a close race between the Hong Kong Stock Exchange and its competitors, like NASDAQ, Tokyo Stock Exchange and BM&F Bovespa from Brazil for the other top three spots in terms of IPO funds raised," Lau said.

One company is particularly worth watching, according to Lau. "For Hong Kong we believe Chinese e-commerce company Alibaba is the true wild card. If the company launches an IPO this year, it would secure Hong Kong at least the runner-up slot and may even help it regain the crown as the world's top IPO market in 2013," he said.