A tremendous surge in Hong Kong IPOs in recent weeks indicates a return to health for capital markets in the region, and well positioned firms are reaping the benefits.
“This year has been an interesting year in terms of pace,” Paul Hastings Hong Kong chair Neil Torpey said. “In the first couple of months, markets were looking very robust and were receptive to a lot of capital market deals. In March, the European liquidity crisis effectively slowed debt, capital and credit markets globally, including Hong Kong and we saw a period from March to July whereby the Hong Kong IPO market was much slower. Now in the last several weeks, the market in the US has advanced in a significant way and there’s a much higher level of receptivity amongst investors towards new offerings that are coming to market in Hong Kong, with quite a significant appetite.”
Torpey says his firm is currently working on approximately 25 Hong Kong IPOs and has hired 20 new lawyers in the last 12 months to cope with the influx of capital markets and finance work. “There is a tremendous amount of activity in that space right now. What has changed in the last several weeks is while we’ve been very busy on a number of these deals, now the deals are beginning to come to market and go to the finish line,” Torpey said.
Changfeng Axel – a leading Chinese auto parts manufacturer – completed a Hong Kong public offering and an international offering under Regulation S/Rule 144A on September 27. “We have seen the number of completed listings in the Hong Kong IPO market pick up over the past few weeks and the Changfeng Axel IPO is the first in a series of upcoming IPOs that our capital markets team expect to complete in the next several weeks, “ Paul Hastings chair of greater China practice Raymond Li said.
Meanwhile, a team from Orrick led by partners Edwin Luk and Allen Shuyu recently advised Boshiwa, a high-end Chinese children’s product manufacturer in its US$320m IPO on the main board of the HKSE. “As the markets continue to improve, we expect to see more Chinese companies with similar profiles as Boshiwa tap the capital markets in Hong Kong,” Luk said.
Orrick also acted on the US$223m HK IPO of Trony Solar – a Shenzhen-based solar power photovoltaic module manufacturer – that took place on 7 October 2010. The Orrick team was led by Edwin Luk and Phoebus Chu.
Other firms have been busy with IPO work too. Maples and Calder recently completed three IPOs on the Hong Kong Stock Exchange, Maples acting as BVI & Cayman counsel to issuers China Medical System Holdings, Microport Scientific Corporation (US$213m) and Besunyen Holdings.
According to Maples and Calder lead partner Greg Knowles, the HKSE offers good liquidity and favourable p/e ratios in addition to its pro-business environment. "The HKSE and the Cayman Islands and BVI corporate regimes have a common characteristic - they are at the same time both pro-business and well-regulated. They complement each other well," Knowles said.ALB
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