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Finance: Funds raised through IPOs may drop 50%

By Hu Yuanyuan (China Daily)
Updated: 2008-07-03 10:43

Funds raised through China's IPOs this year may shrink by nearly 50 percent due to the persistently sluggish market, but small and medium enterprises' IPOs are not likely to be seriously affected, PricewaterhouseCoopers (PwC) said in a report yesterday.

The total funds raised in Shanghai and Shenzhen stock exchanges have decreased by 41 percent year-on-year to 89.8 billion yuan for the first six months of 2008. In Hong Kong, the total number of IPOs in the first half of the year reached 23 compared with 34 in the same period last year.

"Besides stock market volatility and China's austerity measures, the heavy snow last winter and the recent earthquake have had a certain impact on the economy. Many companies have chosen to postpone their flotation plans as they are not in need of cash and want to wait until market conditions improve," said Charles Feng, PwC Beijing office lead partner.

The Shanghai Stock Exchange had a total of four IPOs in the first half of 2008 compared with 12 last year, with total funds raised amounting to 66.8 billion yuan compared to 141.1 billion yuan in the same period of 2007.

On the Shenzhen Stock Exchange, where the new listings are dominated by small and medium-sized enterprises, the number of IPOs, however, rose to 54 from 38 last year, with funds increasing by 87 percent from the corresponding period of last year to 23 billion yuan.

"Investors will be increasingly cautious toward big IPOs under the uncertain capital market environment in the second half of 2008. However, there is still abundant capital supply in the market, therefore IPO activities should remain strong for small and medium-sized enterprises," said Frank Lyn, China markets leader of PwC.

PwC predicts that the IPO funds raised on the mainland and in Hong Kong markets will reach 250 billion yuan and HK$130 billion in 2008, implying investors could still count on 160.2 billion yuan and HK$79.7 billion new funds raised from mainland and Hong Kong respectively in the second half of the year.

"As a number of uncertainties will be clearer in the next six months, we believe the market sentiment will be warmed up and IPO focus will be on the retail, consumer goods and services, and mining and energy companies," said Richard Sun, assurance partner of PwC.