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SINGAPORE : Singapore is expected to lag behind Hong Kong and China next year when it comes to attracting initial public offerings (IPOs). Market watchers said that is because firms prefer to position themselves nearer the massive Chinese market.
A study by Ernst & Young has shown that there was a pickup in IPOs globally in the second half of this year, stirred by the market rebound.
About one-third of all new global listings in the first 11 months of 2009 chose to go public in Shenzhen and Hong Kong.
And that includes the second largest IPO this year - China State Construction Engineering Corp. Valued at US$7.3 billion, it accounted for almost 8 per cent of the total amount raised in 2009.
Altogether, 155 companies were listed in Shenzhen and Hong Kong during the period - compared to just 15 in Singapore.
Daryl Liew, chief investment strategist, Providend, said: "I think it is going to be quite difficult for Singapore to usurp the China and Hong Kong listing market. I guess one way to look at it is that you need to look at why all these companies are flocking to China and Hong Kong to list.
"Primarily, you are looking at the consumer market there - so they want to be close to the consumer markets. They are also looking at far better valuations.
"If you are a company planning to list and you can get 10, 15x PE in Hong Kong or China, and you come to Singapore and they are giving you like 3 to 7 PE, you do not have to really consider it. Hong Kong and China is giving far better valuations."
But market watchers also noted that signs of fatigue are emerging.
Mr Liew said: "Of all the companies that listed this year in Hong Kong and China, it does appear that the market is a bit fatigued, saturated - which is one of the reasons why if you look at the China A-share market, it has been falling in the last couple of weeks - a sign of not enough liquidity in the marketplace to absorb these new IPOs."
Of the top 10 IPOs by capital raised this year, six are from emerging markets. And all in, 459 went public in the first 11 months of 2009. For the whole year, the total is expected to be far short of the 740 IPOs last year.
Industrials, including automobiles and components, and building and construction and engineering businesses led the pack in number of listings. But it was financials, industrials, and real estate firms that raised the most capital in 2009. - CNA/ms
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