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IPO in Hong Kong – your international capital formation centre in Asia

IPO in Hong Kong – your international capital formation centre in Asia. Hong Kong Exchanges and Clearing Limited 26 September 2007 Almaty Kazakhstan. Listing of CIS banks in Hong Kong. Hong Kong is the nearest IFC from Kazakhstan and many CIS countries Almost the same time zone

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IPO in Hong Kong – your international capital formation centre in Asia

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  1. IPO in Hong Kong – your international capital formation centre in Asia Hong Kong Exchanges and Clearing Limited 26 September 2007 Almaty Kazakhstan

  2. Listing of CIS banks in Hong Kong • Hong Kong is the nearest IFC from Kazakhstan and many CIS countries • Almost the same time zone • Investors and investment banks have experience in restructuring and listing banks from China • Very favorable PE valuations for banks in emerging economies • Many of the world’s largest financial institutions with sophisticated understanding of banks in emerging markets are headquartered in Hong Kong

  3. HKEx ranks 7th among global exchanges London (5th: USD3,854 bil) Tokyo (2nd: USD4,518 bil) New York (1st: USD15,590 bil) Shanghai (6th: USD2,382 bil) Shenzhen (19th: USD707 bil) Singapore (21st: USD483 bil) Hong Kong (7th: USD2,276 bil) Source: WFE – World Federation of Exchanges (as ofAug 2007), Nasdaq data as of Jul 2007

  4. Rank IPO equity fund raised (USD bil) Stock Exchange Total fund raised (USD bil) Rank 1 56 London 95 2 2 67 3 43 Hong Kong 3 103 37 NYSE 1 4 26 Euronext 27 8 … … Singapore 17 5 6 22 Total fund raised amount by global stock exchanges in 2006 World’s largest IPO - Industrial and Commercial Bank of China Limited raised about USD16 bilin Hong Kong on 27 Oct 2006 Source: WFE (Jan – Dec 2006)

  5. Global top 5 IPOs from Jan 2005 to Aug 2007 – 3 were listed in Hong Kong Hong Kong can conduct super large IPOs 91% 91% 93% Source: Bloomberg

  6. Market P/E Ratio New York 18 London 12 Hong Kong 18 Singapore 16 Korea 15 Competitive P/E ratio among other securities markets Source: Taiwan Stock Exchange website (as of June 2007)

  7. Market capitalization (Jul 07) vs GDP (06) ratio High % of Market Cap / GDP = High degree of internationalization Source : International Monetary Fund & World Federation of Exchange

  8. The Heritage Foundation has rated Hong Kong as… The World's Freest Economy • No trade barrier • Complete freedom of capital flow • Well- established rule of law • Low taxation • Extensivebanking and service industry that is regulated non-intrusively and transparent for 13 consecutive years Source: 2007 Index of Economic Freedom published by The Wall Street Journal and The Heritage Foundation

  9. The City of London Corporation :Hong Kong’s competitiveness as a financial center… No. 1 in Asia & No. 3 in the world People Business Environment Market Access “Hong Kong is a thriving regional centre.  It performs well in all of the key competitiveness areas, especially in regulation… Hong Kong is a real contender to become a genuinely global financial centre.” Infrastructure General Competitiveness Source: Research on the Global Financial Centres Index by The City of London Corporation, Mar 2007

  10. The Hong Kong market accommodates issuers of different size Market capitalization of the 1,206 listed Hong Kong companies (as at 31 Aug 2007) No. of Companies 47% of the listed issuers’ market capitalization is less than HKD1 bil Market Capitalization (HKD) Source: HKEx

  11. We have expertise in IPOs of different sizes No. of newly listed companies from Jan 2003 – Aug 2007 No. of companies 67 33 46 51 50 22 26 IPO fund raised (HKD) 4 Note: Excluding 19 companies which were listed by introduction and 6 Real Estate Investment Trusts Source: HKEx

  12. Brokers come from different parts of the world Origin of the 132 overseas brokers in Hong Kong Number of Overseas Brokers “Others” include brokers from Switzerland, Netherlands, Australia, Germany, Philippines, Thailand, etc 27 23 22 17 11 8 7 5 5 4 3 Source: HKEx (as of June 2007)

  13. Listing in Hong Kong provides exposure to a diversified international investor base… • 42% of cash market trading are generated from overseas investors • 65% are generated from institutional investors Source: HKEx Cash Market Transaction Survey 2005/06

  14. Overseas fund managed in Hong Kongis set to grow further … partly thanks to QDII USD bil USD791 bn (+36%) Increased by 280% in 5 years 62% USD582 bn (+25%) USD465 bn (+23%) 63% 63% USD379 bn (+80%) USD210 bn (+0%) USD208 bn 38% 63% 63% 37% 70% 37% 37% 30% 37% Source: SFC Fund Management Activities Survey 2006

  15. .. As well as new listings from the Mainland Mainland Enterprises Total No. of listed companies (as of 31 Aug 2007) 1,206 17,747 54 47 139 132 3,295 383 9,987 36 26 106 67 1,660 32% 56% 66% 55% 76% 50% 50% Market capitalisation (HKD bil) (as of 31 Aug 2007) Daily Average Turnover (HKD bil)(Jan – Aug 2007) No. of newly listed companies (Jan – Aug 2007) Funds raised by IPO (HKD bil)(Jan – Aug 2007) Funds raised in secondary market (HKD bil)(Jan – Aug 2007) Total funds raised (HKD bil)(1993– Aug 2007) Source: HKEx

  16. Japan Korea Indonesia Companies With foreign shareholders Singapore Taiwan region Canada Malaysia Thailand Besides Mainland Chinese companies, we are also a platform open to foreign companies … About 80 companies from 15+ locations (excluding Mainland China and HK) with foreign shareholders are listed in HK Majority of them are from Asian countries About half of these companies have significant operations in China Note: Companies with foreign shareholders are defined as companies controlled as to 30% or more by an entity which is neither from Mainland China nor from HK

  17. Some of which operate outside of Hong Kong and China Mongolia N. America Cambodia Vietnam Indonesia * Listed on GEM (Stock Code: 8260) in December 2003 at an offer price of USD 0.06 (HKD 0.45) per share and raised a sum of USD 13.8 mil at IPO. The company was transferred from GEM to Main Board on 1 March 2006. Source: HKEx

  18. Shanghai Shenzhen A and H Shares : the dual listing model in HK A shares • Renminbi denominated ordinary shares • Issued by companies incorporated in the PRC • Listed on Shanghai and Shenzhen Stock Exchanges • Traded in Renminbi • Available only to local Mainland Chinese investors and qualified foreign institutional Investors (QFII) Source: HKEx and FTSE Xinhua Index

  19. Shanghai Shenzhen A and H Shares : the dual listing model in HK (cont’d) H shares • Renminbi denominated ordinary shares • Issued by companies incorporated in the PRC • Listed on the Stock Exchange of Hong Kong • Traded in Hong Kong dollars • First H-Share listed in July 1993 We are very experienced in handling listings of companies from an emerging economy Source: HKEx and FTSE Xinhua Index

  20. Hang Seng Index past performance (Sept 06 – Aug 07) As of 30/06/2007, • Hang Seng Index at a record high of 23,984.14 on 31 Aug, an increase of 38% yoy Source: Bloomberg and HKEx

  21. Listing statistics of some financial institutions in HK (31 Aug 2007) Source: HKEx * Bloomberg as at 24 Sept 2007

  22. Banks & Financial Institutions listed in Hong Kong: China CITIC Bank % Change since IPO: 2% Market Cap.: USD 9,548 mil Average Daily Turnover in 2007: USD 48.2 mil Listing Date: 27 Apr 2007 IPO Fund raised: USD 4,232 mil Source: Bloomberg and HKEx

  23. Banks & Financial Institutions listed in HK:(1) Industrial and Commercial Bank of China % Change since IPO: 65% Market Cap.: USD 54,232 mil Average Daily Turnover in 2007: USD 246 mil Listing Date: 27 Oct 2006 IPO Fund raised: USD 16,060 mil Source: Bloomberg and HKEx

  24. Banks & Financial Institutions listed in HK:(2) Bank of China % Change since IPO: 36% Market Cap.: USD 39,183 mil Average Daily Turnover in 2007: USD 187 mil Listing Date: 1 Jun 2006 IPO Fund raised: USD 11,149 mil Source: Bloomberg and HKEx

  25. Banks & Financial Institutions listed in HK(3) Bank of Communications % Change since IPO: 250% Market Cap.: USD 25,970 mil Average Daily Turnover in 2007: USD 90 mil Listing Date: 23 Jun 2005 IPO Fund raised: USD 2,164 mil Source: Bloomberg and HKEx

  26. Banks & Financial Institutions listed in HK(4) China Life % Change since IPO: 949% Market Cap.: USD 36,010 mil Average Daily Turnover in 2007: USD 407 mil Listing Date: 18 Dec 2003 IPO Fund raised: USD 3,434 mil Source: Bloomberg and HKEx

  27. Banks & Financial Institutions listed in HK(5) Ping An Insurance % Change since IPO: 685% Market Cap.: USD 26,672 mil Average Daily Turnover in 2007: USD 90 mil Listing Date: 24 Jun 2004 IPO Fund raised: USD 1,843 mil Source: Bloomberg and HKEx

  28. Listing requirements Main Board – 3 financial criteria • Profit Test Profits of 3 years≥ USD6.4million (HKD50million) • Market Cap/Revenue Test (i) Market Cap≥ USD513million (HKD4billion) (ii) Revenue of the most recent audited year ≥ USD64million (HKD500million) • Market Cap/Revenue/Cash flow Test (i) Market Cap≥ USD256million (HKD2billion) (ii) Revenue of most recent audited financial year ≥ USD64million (HKD500million) (iii) Aggregate positive cash flow for 3 preceding financial years ≥ USD13million (HKD100million) GEM – No profit or other financial requirement Fulfill any one test

  29. Listing requirements (Cont’d) Main Board – Operating History • 3 years (may accept a shorter trading record period if qualify under the Market Cap/Revenue test) • Management continuity • Ownership continuity and control for at least the most recent audited financial year GEM – Operating History • 2 years (maybe reduced to 1 year if certain requirements are met)

  30. Recommendation Listing process An issuer decides to list on HKEx Appointment of sponsors &other professional advisors Sponsor submits listing application & related document to the Listing Division of HKEx Restructuring, preparation of Accountants’ Report, drafting of prospectus Successful listing in Hong Kong Roadshow to promote to investors before trading commences Hearing by Listing Committee Review of listing application by the Listing Division Approval

  31. To facilitate listings of overseas companies in Hong Kong - 7 Mar 2007 SFC-HKEx Joint Press Release clarified the requirements of overseas issuers seeking a listing in applicants to comply with the shareholder protection requirements • 2H 2007 Introduction of a Depositary Receipt regime under study We are developing a Depositary Receipt program

  32. The HKEx strategic plan 07-09 HKEx Mission 2004-06 “To operate a world-class marketplace for Hong Kong and Mainland China securities and derivatives products.” HKEx Mission 2007-09 “To be a leading international marketplace for securities and derivative products focused on Hong Kong, Mainland China and the rest of Asia.”

  33. Contact Business Development Division Add: 10/F, One International Finance Centre 1 Harbour View Street, Central, Hong Kong Tel: (852) 2840 3780 Fax: (852) 2530 2858 Email: bdd@hkex.com.hk HKEx website: www.hkex.com.hk

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