Hong Kong has invited Indian private and public sector firms to consider its territory for fund-raising through initial public offers (IPOs), private equity and venture capital.
“Indian companies must avail of the fund-raising opportunities in the Hong Kong market, and list their companies there,” said Raymond Yip, Assistant Executive Director of Hong Kong Trade Development Council.
In October 2010, Hong Kong’s Chief Executive Donald Tsang had visited India and invited business leaders to set up manufacturing and trading units in Asia’s fastest growing trading hub.
Following the handover of sovereignty to China in 1997, Hong Kong has been executing major deals in the US dollar. “But China’s renminbi was recently allowed as an official currency for trade execution, which will boost our business,” said Yip.
Hong Kong has maintained its place as the world’s largest listing market in terms of fund-raising size, with a record HK$445 billion raised in 2010. However, the participation of Indian corporate has not yet begun.
According to a report by Consulate General of India in Hong Kong, Chinese and foreign companies wanting a slice of the capital inflows into the city are behind the surging Hong Kong IPO market, and this trend looks set to continue.
For the past decade, Pricewaterhouse Coopers (PwC) has had a front seat in the Hong Kong capital markets, with the firm having been involved with over 42% of the IPOs totaling HK$760.1 billion since 2001.
There are about 1,500 Indian companies engaged in various activities from manufacturing of raw material to processing and exports to mainland China. Export to China attracts very high Customs duty from other countries. Traders take advantage of the duty-free regime in Hong Kong for exports to mainland China. Incidentally, exports to China from Hong Kong are duty-free.
To attract more business from India, the Hong Kong Trade Development Council is organising Asian Financial Forum, a trade show, in January next year in Hong Kong. Last edition of this show two years ago attracted 13 participants from India, and the number is likely to go up in the next one.
Despite market volatility weighing on pricing and post-IPO performance, there is no shortage of investors wanting to tap into the Hong Kong capital markets. An estimate by PwC says that Hong Kong will continue to be amongst the top IPO rankings again in 2011, with around HK$300-HK$350 billion likely to be raised from 110 new IPOs mostly being made up of SMEs.
The total funds raised through IPOs in Hong Kong were 79% more than in 2009 (HK$248.2 billion). The number of IPOs totalled 114 last year, increasing by 56% compared to 2009.
Bilateral ties between India and Hong Kong
According to the Consulate General of India in Hong Kong, the bilateral trade between the two for the period between January and December 2010 stood at $18749 million, representing only 2.3% of overall business in the offshore country. The trade recorded a surge of 39.4% from the previous year. Now, India has emerged as the seventh largest trading partner of Hong Kong for 2010.
Exports from India during 2010 jumped 36.5% to US $9204 million of which goods worth US $7,412 million re-exporter to other countries from Hong Kong. India exports mainly rough and polished diamond, textiles, leather goods, information technology and electrical products. Imports to India from Hong Kong rose 42.4% totaling US $9545 million.
