HONG KONG: Recovering markets and satisfactory initial share offering results are drawing cash-dry companies to test Hong Kong's funding pool again.

Guotai Junan Securities' Hong Kong operation, which previously delayed its share sale in Hong Kong, has decided to update its IPO (initial public offerings) prospectus for prompt listing. Silver Base Group, a mainland liquor dealer, priced its IPO at the top of its indicated range on strong investors' demand.

"When market sentiment rebounds, deal flows will gradually pick up because the pipeline of quality mainland companies seeking for IPOs is strong," said Richard Sun, an assurance partner with PricewaterhouseCoopers (PwC).

"We believe that the Hong Kong stock market is still attractive for IPOs as it is the gateway for foreign investors to access the mainland market," he said.

Some investors are still interested in searching for quality companies with strong fundamentals, Sun added.

Guotai Junan (Hong Kong), a unit of the mainland's leading brokerage, is preparing to list in Hong Kong and aims to submit an application this year, sources familiar with the matter said.

"We hope for an early listing if the market is good. If the market is bad, we can wait. Public listing can help us establish a financing platform," the source said.

The US subprime crisis and global credit crunch, which both dampened investors' appetites for new stocks, dealt a heavy blow to the IPO market. Hong Kong's benchmark Hang Seng Index (HSI) tumbled 48 percent last year, prompting many companies to postpone IPOs. Orient Securities Co, another leading securities firm on the mainland, has delayed its share offering indefinitely.

PwC predicted that funds raised through new IPOs will be HK$70 billion in 2009, slightly above the 2008 figure of HK$66 billion.

Guotai Junan (Hong Kong)'s profit increased last year and earnings prospects look good despite the crippling effect on the stock market during the year, the source said.

The firm originally planned to raise about HK$500 million via an IPO in Hong Kong.

Popular IPOs

Silver Base Group, which distributes products made by Sichuan-based distillery Wuliangye Yibin Company Ltd in addition to cigarettes, raised $133 million after pricing its Hong Kong IPO at the top of its indicated range, according to people privy to the deal.

Silver Base sold 300 million shares at HK$3.45 each, the top end of a range between HK$2.30 and HK$3.45 per share, in a share sale handled by BOCI Asia Ltd and UBS.

The stock is set to begin trading on April 8.

Changyou.com, an online gaming spin-off of New York-listed mainland portal Sohu.com, gained 38 percent in its debut on the New York Stock Exchange, where IPO market has been largely shut over the last seven months.

(HK Edition 04/04/2009 page2)