A number of small firms from the mainland plan to float their shares in Hong Kong in the next few weeks, capitalizing on the current market vacuum to avoid clashes with massive initial public offerings (IPO) due early next year.

Eight candidates are expected to raise a total of HK$11 billion (US$1.4 billion) this month.

They include the Jiangsu-based real estate firm New Heritage Holdings and the Zhongshan-based property developer Agile Property. The nation's third largest auto maker Dongfeng Motors is another of the firms and China's largest crystallized glucose producer Xiwang Sugar is also a candidate.

"The (current) rather tranquil market sentiment provides an opportunity for them to avoid direct competition with other massive listing candidates such as Link REIT and China Construction Bank (CCB)," said Kenny Tang, associate director of Tung Tai Securities. The two firms together raised US$11.6 billion in their IPO in October and November.

During that period, several smaller mainland firms were forced to delay, downsize or call off their listing attempts, as the duo almost soaked up the liquidity of the entire market.

"December will be quiet with the absence of behemoth IPOs and the recovery of market liquidity," said Tang, adding that smaller candidates, therefore, would find it a lot easier to attract subscription during this time.

"December is a good time. If they miss the chance, they may have to directly clash with another listing spree in 2006," Tang noted.

The mainland's top two commercial lenders, Industrial and Commercial Bank of China (ICBC) and Bank of China, have announced they are ready to float their shares in early 2006.

Both deals have the potential to surpass CCB and become the world's largest IPO in five years.

In addition, there is a lot of speculation in Hong Kong that it will stop increasing interest rates after January.

"The upswing of US interest rates might end in January instead of the forecast of September of 2006," ICBC (Asia) Executive Director Stanley Wong said. Hong Kong, whose currency is pegged to the greenback, typically follows US moves to adjust its lending rates.

Hong Kong has seen seven interest rate hikes this year, with the cost of capital rising from 1 percent to 4 percent. This has dented the investment spree and forced a number of companies to postpone their listing attempts.

"Projections on the interest rates will surely activate the stock market in the coming weeks. It is a better time to offer shares," said a Hong Kong-based analyst, who spoke on condition of anonymity.

(China Daily December 1, 2005)