Mainland firms cash in on Hong Kong IPOs

Hong Kong was the largest fundraising hub for mainland enterprises in the first 11 months of 2012, according to statistics from China Venture.

Its data showed that as many as 41 mainland enterprises were listed on the Hong Kong Stock Exchange's main board and raised 36.24 billion yuan ($5.81 billion) from January to November, 94 percent of the total amount raised by mainland enterprises during the same period.

The trading floor of the Hong Kong Stock Exchange. Forty-one mainland companies raised 36.24 billion yuan on the HKSE from January to November. Provided to China Daily

The money mainland businesses raised in Hong Kong made up a large part of all capital raised through initial public offerings in the special administrative region. As many as 62 new listings brought in HK$89.4 billion ($11.53 billion) in 2012, according to a report by the professional services firm Deloitte Touche Tohmatsu Ltd.

Analysts said high borrowing costs, long waiting times and high fundraising standards in the Chinese mainland are the biggest reasons why domestic enterprises favor the overseas market.

The annual interest rate on money borrowed from banks is usually around 7 percent in the mainland, which is too high for many enterprises, especially small and medium-sized ones, said Ma Yaping, stock market analyst with Shanghai Jufeng Investment and Management Co Ltd. The rate can be as low as 2 percent in Hong Kong, Ma said.

Enterprises that are in dire need of raising money to pay for expansion plans are also concerned about the length of time it takes to have an IPO approved on the mainland, Ma said.

The China Securities Regulatory Commission, the securities watchdog, has not approved a new issuance since October.

More than 800 enterprises in the mainland are now waiting for the regulator to approve their IPO applications so they can be listed in Shenzhen or Shanghai. If the average number of enterprises that have received approvals in past years is any indication, they may be kept on hold for another five years.

The looser requirements that apply to mainland companies seeking to go public overseas also appeal to Chinese enterprises, Ma said.