Research compiled by accountancy firm PricewaterhouseCoopers (PwC) shows that China is predicted by almost 80 per cent of executives surveyed to be the most favoured destination for companies looking to raise capital and float their businesses, despite the Shanghai market not currently being open to foreign issuers.
Additionally, the same amount predicted that businesses listing in China would raise the most capital of any international exchange.
Clifford Tompsett, IPO Centre leader at PwC, says that while a shift to the East may seem inevitable, established exchanges around the world disagree the shift will be as fast.
He adds: ‘There have been major IPOs in the UK, the US, Spain and Poland this year and PwC expects this to continue in the near term.
‘If we are set for an IPO “tug-of-war” between West and East, it can only benefit companies and investors.’
The combined market capitalisation of China’s Shanghai and Shenzhen equities markets has risen from $400 billion in 2005 to $4 trillion at the end of 2010.
The report finds that while current attractiveness ratings for IPOs in London and New York stand at 72 per cent and 74 per cent respectively, the figure drops to 27 per cent and 39 per cent when respondents were queried on prospects for 2025.
However despite the overall feeling that China is set to offer the best returns for listing businesses the Shanghai stock exchange is closed to foreign issuers, even after an announcement by the Chinese Government in 2008 that it was going to open up the market.
Jonathan Reardon, head of corporate in China for law firm Pinsent Masons, comments: ‘With the growth of emerging economies in Asia and soaring numbers of high net worth individuals in China and elsewhere in Asia there will undoubtedly be a surge of international companies listing or secondary listing on Asian markets.’
Reardon believes that the biggest challenges facing the Eastern markets centre round the legal and regulatory environment that currently exists, and will ultimately develop.
Tompsett adds that although the capital markets appear to be turning towards the East it is still ‘imperative’ for companies to select the right stock exchange for their particular needs.
He says: ‘Each exchange has its own particular merits and businesses must carefully consider which of these markets is best to tap.’
