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persist, there exists a backlog of deals to be
launched as market sentiment improves,”
says Paul Lau, a China partner with the firm
and an Institute member.
China’s domestic IPO market also stalled
in 2012, and that undermined sentiment for
IPOs of Mainland companies in Hong Kong.
More than 800 applicants on the China Se-
curities Regulatory Commission list are
projected to raise about 500 billion yuan,
compared to total funds of 103 billion yuan
raised by A-share IPOs in 2012, according to
Patrick Law, an assurance partner at E&Y.
A revival in China’s domestic market could
boost success rates for new overseas listings
Not everyone is conv inced, however,
that the domestic market is ready for a large
recover y. Domestically listed A-shares re-
main in a bear market – they now trade
more cheaply on average than their H-share
counterparts in Hong Kong.
China’s stock markets will remain prob-
lematic, according to UBS chief economist
Wang Tao. “Issues include problems in the
IPO process, insufficient transparency in
company disclosures, inadequate investor
protection and insider trading,” she says.
“ The gover nment often sees the stock mar-
ket more as a source of financing for the
economy than as a way to improve capital
Mergers and acquisitions
The value of global mergers and acquisi-
tions deals in 2012 was barely half the
amount made five years ago at the begin-
ning of the global financial crisis, accord-
ing to Ernst & Young. M&A value totalled
US$2.25 trillion last year, against US$4.3
trillion in 2007, E&Y data says.
However, Chinese acquirers are increas-
ing their activity. Chinese investors made
direct investments in 2,163 overseas enter-
prises in 116 territories in the first half of
2012, according to Mergermarket, a Lon-
don-based data provider. Total non-finan-
cial direct investment overseas amounted
to US$35.42 billion in 2012, a year-on-year
rise of 48.2 percent. This momentum is
expected to continue, partly fuelled by a
stronger yuan, especially against the euro.
“In the eyes of some Chinese investors,
the ongoing euro zone uncertainties im-
prove their chances of striking good deals
with debt-ridden European companies,”
notes Allan Zhang, a director at Pricewa-
terhouseCoopers who advises on outbound
The U.S. is also becoming a favoured
destination for Chinese investors. “It is a
good market,” says Anthony Root, who
heads the Asia corporate practice of
law firm Milbank, Tweed, Hadley
& McCloy in Hong Kong.
Root says that as recently
as two years ago, Chinese in-
vestment in the U.S. was fo-
cused on natural resources.
“ Since then it has evolved
beyond natural resources
into infrastructure, brand-
ed consumer products, air-
craft parts and automotive
parts,” he adds.
Despite increased regu-
42 January 2013
often sees the
stock market more
as a source of
financing for the
economy than as
a way to improve
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