Shanghai To Rival Hong Kong as Asia’s IPO Hub?

on February 7 2011 | in Trends | by | with No Comments

Shanghai, stock exchange, The Bund, the bull,

The Hong Kong Stock Exchange is getting rock-solid creds as Asia’s financial hub for capitalists chasing ties with China. Proof that Hong Kong is behaving as China’s key business outlet is strengthened most recently with Prada‘s announcements of listing in Hong Kong. Where does that leave Shanghai? After all, the Chinese government hopes Shanghai will become the world’s epicenter of finance by 2020. Whether or not that is feasible, Hong Kong Bureau Chief Peter Stein at the WSJ gives Hong Kong today’s edge over Shanghai for simple reasons.

For one, higher valuations. A company gets a better price for its shares in Hong Kong than in Shanghai. “Any company opting to sell shares in Shanghai would have to explain to board directors and shareholder why it chose to forego the cheaper cost of capital,” said Stein.

Also, lots of IPO buzz. Move over, Prada. Bankers anticipate other headline names to stage more IPOs in Hong Kong. Yum Brands is one.

But stock-market watchers don’t count on Hong Kong’s supremacy going unrivaled. If Hong Kong has today’s edge, market research firm, Evalueserve, notes that Shanghai as a finance hub has no way to go but up.

Evalueserve backs up its observation with the release of a poll of 150 companies on the mainland. They found a whopping 76 percent of private companies that said they were more keen on a domestic listing. Among the companies planning a local listing in the next five years, 62 percent said they were leaning towards the Shanghai Stock Exchange while others looked towards the Shenzhen market.

Then there’s the “I” word – inflation- which could be the most compelling reason to watch Shanghai as a financial hub. Analysts see lots of activity in 2011 as a kind of fallout from jitters over a housing bubble. Evalueserve China analyst Kristin Graham says the government in China aims to place a cooler on the property market. China’s investors will be treasure-hunting elsewhere for good investments. She foresees greater interest in equity markets, with a flow of money out of real estate into equities.

photo credit: alan lam

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