Hong Kong secondary market activity booms


Posted on September 17, 2010 at 9:09 PM

Opportunities for secondary offerings legal work in Hong Kong have increased due to a recent boom in secondary share market activity. Hong Kong’s follow-in shares reached a record high of US$8.5bn this week, making its secondary share activity second only to Shanghai.

This kind of secondary market activity is the mark of a growing Hong Kong economy, Mayer Brown JSM partner Jeckle Chiu told Asian Legal Business. The trend in Hong Kong this year has been an increase in follow-on offer issues, Chiu said. CML Recruitment’s recent follow-on offering in Hong Kong is an example of this trend; the value is determined by the shareholder exit, as opposed to the capital raised by the companies. This offering was second only to the $9.6bn deal made by China mobile in 2000, according to the Thomson Reuter’s deals intelligence report for the week starting from Sept 9.

Slaughter and May has seen a number of good deals come through as a result of the recent healthy market conditions, Slaughter and May partner Benita Yu told ALB. Recently, Slaughter and May advised a US$100m follow-on offering issue for Semiconductor Manufacturing International Corporation, and a US$100m share placing to Datang Telecom Technology & Industry.

This boom of activity lifts Hong Kong’s market out of its recent stagnant state. In August, Hong Kong’s secondary market seemed to lag behind. Atlhough the Agricultural Bank Flotation and other HK deals boosted the HKEx’s activity, the market saw a 16.4 percent dip in net profits. This could be attributed to the lackluster secondary market at the time. Hong Kong based-brokers cited the faulty HKEx secondary market structure as a point of frustration, Asia Sentinel reported in August.

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