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Mainland to lead global IPO market recovery

By Li Xiang (China Daily)
Updated: 2009-11-11 08:41

China will lead the recovery of the global initial public offering (IPO) market, consultancy firm Ernst &Young said in its latest survey of institutional investors across the world.

The survey said China was the first IPO market to recover from the global economic downturn. Over 75 percent of the respondents said they expect the market to recover in the third and fourth quarter of this year.

The online survey was conducted among 305 institutional investors between August and early September this year.

"The potential for continuing growth and higher safety in the market are the reasons for the funds flowing into the Chinese IPO market," said Ringo Choi, regional managing partner, China South at Ernst & Young.

China-based IPOs accounted for 65 percent of the funds raised globally during the third quarter of this year. The trend is expected to be strong in China next year also, the survey said.

"China-based companies have been at the forefront of capital market activities and have clocked more deals than North America and Europe put together," Choi said.

China State Construction Engineering raised a total of $7.3 billion from its July offering in what has so far been the second largest global IPO this year after the $8-billion float of Brazilian bank Banco Santander Brasil.

China Metallurgical Construction's $2.8-billion IPO and Everbright Securities' $1.7-billion IPO were also among the top 10 global IPOs in 2009.

The growing trend is underpinned by the strong sentiment of global investors in the Chinese market with 64 percent of the survey respondents expecting to increase their level of investment in the country's IPO stocks.

Related readings:  China Merchants Securities sets IPO price range  China Merchants Securities to launch IPO this week  China Real Estate IPO prices within expectations  10 firms ready for IPO on China's NASDAQ

Private equity (PE) and venture capital (VC) firms are also expected to bolster IPO activities in the country, especially after the launch of ChiNext, China's NASDAQ-style trading board.

"Private equity backed companies are playing a significant role in driving public offerings and they are poised to increase in importance in China given the backlog of companies wanting to divest holdings," said Terence Ho, Strategic Growth Markets and IPO leader, Greater China at Ernst & Young.

Twenty of the first 28 companies that went public on the ChiNext are VC/PE-backed companies.

"This trend will continue as PE/VC investors back high growth enterprises which dovetails China's national strategy of promoting innovation," said Ho.