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Mainland IPOs Boost Hong Kong Market
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Two massive mainland initial public offerings (IPOs) have helped Hong Kong overtake New York this year as the world's second-largest IPO market, according to a top financial official.


Capital raised from IPOs in Hong Kong in the first ten months of this year totalled HK$258 billion (US$33 billion), a leap of 76 percent year-on-year, said Ronald Arculli, chairman of Hong Kong Exchanges and Clearing Ltd (HKEx).


At the same time, overall capital raised in the equity market through all fundraising methods including IPOs surged 44 percent to around HK$393 billion (US$50 billion).


Bank of China (BOC) and Industrial and Commercial Bank of China (ICBC) raised roughly US$30 billion through their Hong Kong offerings.


Mainland companies have become the major players in Hong Kong's stock market, accounting for more than 30 percent of the 1,100 stocks in the special administrative region. They accounted for around 44 percent of the total market capitalization. Transaction of mainland company stocks constitutes 55 percent of Hong Kong daily turnover.


Huge IPOs by mainland companies have also helped to boost market sentiment and drove the benchmark Hang Seng index to all-time highs in recent weeks, Arculli said.


Although most of the biggest mainland giants have already floated their shares in Hong Kong, it would be a mistake to say that Hong Kong will soon face a dearth of new listings, Arculli said.


"IPO activities will remain vigorous since a lot more mainland companies will use the Hong Kong market as an international platform to raise funds," he said.


His comments appeared to soothe concerns that Shanghai and Shenzhen, which lifted 12-month bans on IPOs earlier this year and have since attracted many listings, would steal Hong Kong's thunder.


"We don't think this will happen. Indeed, China can have more than one financial hub," he said.


Hong Kong has its unique attraction as a global financial center that is home to millions of international investors, while Shanghai and Shenzhen mainly target domestic markets, he said.


Arculli added that the completion of the A-share reform on the mainland, which aimed to transfer a massive number of State shares into tradable stocks, would prompt more mainland enterprises to seek dual listings.


He said HKEx would work closely will its mainland peers in Shanghai and Shenzhen to smooth the process for dual listings.


However, the three bourses have to work together to solve some technical problems such as market opening and trading, information disclosure and the time of trading suspension, he added.


(China Daily November 16, 2006)


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