Himfr.com Reports China IPO yields expected to triple in 2010: analysts

Funds raised through IPOs on the Shanghai Stock Exchange next year will be triple those raised this year, according to projections from accounting firm Ernst & Young.

Terence Ho, Strategic Growth Markets Leader for Ernst & Young, predicted that the abundant supply of stocks wouldn't lead to a market plunge. The firm's report released Monday said next year's IPOs on the SSE would raise 380 billion yuan ($55.6 billion), up from this year's 118 billion yuan ($17.3 billion). About 447 billion yuan ($65.4 billion) was raised from 120 IPOs in 2007.

Ernst & Young expects 30- 40 IPOs on the exchange next year, with most coming from financial and industrial firms, said Ho.

The firm's estimate on the number of IPOs next year comes from the number of companies already approved and those waiting to apply for an IPO.

The new IPOs next year won't lead to an oversupply on the stock market, because "the raised funds are only a small part of the trading volume," and investor confidence is trending upward, Ho said.

"The stimulus policy pushed up the economy, and the market liquidity is likely to be maintained," Ho said. "Market demand is still strong on IPOs after 9 months of suspension following the fourth quarter of 2008. With these combined factors, we think the IPO market will continue to be strong next year, but won't reach the level of 2007."

The report also estimated funds raised on the Hong Kong Stock Exchange (HKEX) next year will hit HK$370 billion ($47.7 billion), 28 percent more than the historic high of HK$290 billion ($37.4 billion) from 2007.

That's due to the exchange's allowing companies incorporated in more overseas locations, such as Australia and Germany, to list on the exchange.

Currently the only foreign companies enjoying such access to the HKEX are those incorporated in the Cayman Islands and Bermuda.

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The HKEX surpassed the SSE this year with HK$246 billion ($31.7 billion) raised in 64 IPOs. Companies incorporated and operating in the Chinese

mainland, including Sinopharm Group and China Minsheng Banking, accounted for 35 percent of the raised funds and 9 percent of the IPO numbers on the HKEX.

The HKEX will also attract listings from a number of overseas natural resources companies in 2010, due to better liquidity and higher prices that the market is willing to offer, Ho noted.

The Shenzhen Stock Exchange (SZSE) known for medium- and small-sized enterprises, and the alternative ChiNext exchange, ranked top with 90 IPOs in 2009, but were only fifth in terms of funds raised, with 58 billion yuan ($8.5 billion).