CN Audit IPOMkt2012Review2013Outlook 080113

Hong Kong and Chinese Mainland IPO Markets 2012 Review and 2013 Outlook
National Public Offering Group Deloitte China 31 December 2012

2013 Deloitte Touche Tohmatsu
In 1H/2012, the capital market stumbled against the backdrop of the following dismal and jittery events:
1 Mass credit downgrade in Eurozone countries Weakening of Chinas economy with growth target cut to 7.5% Corporate governance issues of listed companies, sharp earnings decline among newly listed issuers Anxiety over election result in Greece
Sluggish recovery of U.S. economy
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
Hong Kongs IPO market plummeted in 1H/2012
32
The
new listings, raising HK$
30.6
billion (84%)
(1H/2011: 38 new listings, raising HK$187.2 billion*)
WORST
half-year performance in terms of
proceeds raised since financial tsunami in
2009
Source: Hong Kong Stock Exchange (HKEx), Deloitte Analysis; * including proceeds raised from the offerings of Hui Xian REIT, and the international offering of Glencore International Plc. in 2011
Reduced momentum in Mainlands IPO market in 1H/2012
104
100 80 No. of IPOs 60 40 20 0
new listings, raising RMB
72.6
57 51 25
billion (58%)
(1H/2011: 167 new listings, raising RMB173 billion)
Proceeds Raised in 1H/2012 62 54 61 24 16 23 37 24
Proceeds Raised in 1H/2011 83
(RMB billion)
70 60 Proceeds Raised 50 40 30 20 10
1H/2012 1H/2011
1H/2012 1H/2011
1H/2012 1H/2011
SH Main Board
SZ SME Board
ChiNext
Source: China Securities Regulatory Commission (CSRC), Deloitte Analysis
In 2H/2012, market sentiment gradually picked up upon the following compelling events:
6 7 8 9 10
Monetary easing by Peoples Bank of China in lowering reserve requirement ratio and cutting borrowing rate
QE3 of U.S. Federal Reserve (Fed), Outright Monetary Program of European Central Bank Upbeat China economic statistics point to recovery
Successful transition to new leadership in China, positive market anticipation on economic policies after Central Economic Work Conference
Continuation of U.S. administration
A lackluster market for Hong Kongs IPOs in first three quarters of 2012 but a rebound in last quarter
62
The
new listings, raising HK$
89.8
billion (67%)
(2011: 90 new listings, raising HK$271.4 billion*)
WEAKEST annual performance in terms of proceeds raised since the financial tsunami in 2009. However,
market sentiment has been picking up since midSeptember with the economic stimulus programs from the U.S. and Europe. Driven by the improved market sentiment and liquidity, proceeds raised in the Q4
took up over
Source: HKEx, Deloitte Analysis
50%
of the total
proceeds raised in 2012.

6 Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
In 2012, Mainlands IPO market was mired in a deep malaise along with the cooling economy
154
140 120 No. of IPOs 100 80 60 40
new listings, raising RMB
103.4
Proceeds Raised in 2011 128 115 79 74
billion (63%)
(2011: 281 new listings, raising RMB282.4 billion)
Proceeds Raised in 2012 101 102
(RMB billion)
120 100 Proceeds Raised 80 60
55 33 38 25 35 35
40 20
20 0 2012 2011 2012 2011 2012 2011
SH Main Board
Source: CSRC, Deloitte Analysis
SZ SME Board
ChiNext
Market sentiment at trough resulting in disappointing IPO deal flow and volume in 2012
Hong Kong Shenzhen

(HK$ billion)
ranked no.
in terms of funds raised globally,
behind those of NYSE, NASDAQ, Tokyo Stock Exchange, but ahead of Stock Exchange, Bursa Malaysia, and
Shanghai
IPO Proceeds Raised from Key Global Exchanges for 2012
Stock Exchange.
200 180 160 140 120 100 80 60 40 20 0
178.8
174.3
97.8
89.8
86.0 58.9
New York Stock Exchange**
NASDAQ**
Tokyo Stock Exchange
Hong Kong Stock Exchange
Shenzhen Stock Exchange
Bursa Malaysia
80 Listings
55 Listings
51 Listings
62 Listings
129 Listings
16 Listings
Source: HKEx, Deloitte Analysis ** Exclude proceeds from close-end investment companies, close-end funds and special purpose acquisition companies (SPACs)
Hong Kong
Overview of IPO market 2012 IPO activities lost steam amid market downturn
MB IPO activities were in drought in May and September Market choppiness stymied IPO plans, leading to a no-show of IPO on the Main Board (MB) in May and September 2012, the worst situation for nearly a decade. An uptick in market condition since midSeptember upon liquidity boost from another round of quantitative easing from the Fed and stalled IPO market driving the return of new and larger listings since October. Substantially fewer listing applications accepted by HKEx since 2009 114 listing applications for the MB and Growth Enterprise Market (GEM) were received during 2012, substantially down 44% y-o-y from 203. Only 49 active applications are being processed, displaying a downward trend from 63, a y-o-y plunge of 22%. Lapsed, rejected and withdrawal of listing applications at record high since 2004 In 2012, 52 applications were lapsed without renewal, decreased from 64, or 19% y-o-y. 8 applications were rejected, and 12 applications were withdrawn. Figures have risen from 3, or 167%; and 1, or 1,100% y-o-y respectively.
Slowest Q4 deal flow since financial tsunami down from 31 to 15 y-o-y (52%)
HK MB IPOs 60 50 No. of IPOs 40 30
2 3
HK GEM IPOs
Proceeds from IPOs
(HK$ billion)
350 300 Proceeds Raised 250

3 5
200 150
3 4 3 2
47
3
2 3
20
2
34
100 50 0
10 0
21 11 13 14 10
23
26 18 15
10
12
13
2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4*
The Chinese Mainland

Overview of IPO market 2012 IPO deal flow braked amid fading stock market
IPO activities were muted Chilled market confidence as manifested by indices plunging through various so-called rock bottom levels. Significant slowdown of listing application review observed since May. No offering review meeting was held in August, November and December and only one in September and October respectively. Number of applications were at all-time high 851 listing applications were in the queue for the Shanghai (SH) MB, SME Board and ChiNext as of 28 December 2012. Among these, 22 applications were suspended and 2 were withheld for further actions. In 2012, another 67 applications were either withdrawn or rejected. 90 IPOs are waiting in the wings As of 28 December 2012, 90 applications, which have passed the offering review meeting, were awaiting for listing. 739 active applications were under processing.
The weakest Q4 since resumption of IPOs in Q3 of 2009. Deal flow was down from 48 to 5 y-o-y (90%) and deal volume tripped from RMB56b to RMB3b y-o-y (95%)
SH MB IPO 100 90 80 No. of IPOs 70 60 50 40 30 20 10 0 24 30 52 58 46 48 35 36 29 25 33 30 SZ SME ChiNext IPO Proceeds from IPO
(RMB billion)
180 160 140 43 40 31 14 26 26 28 25 19 26 22 18 11 120 100 80 60 40 20 0 2012 Q4* Proceeds Raised
15 12 11 10 9 9 1 8 6 6 5 5 4 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3
Source: CSRC, Deloitte Analysis. * SH MB IPO: 1; SZ SME Board IPO: 3; ChiNext IPO: 1.
10

Overview of IPO market 2012 Pass Rate of Offering Review Meeting
During 2012,
Pass rate
219
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
1 19
applications were submitted to the Offering Review Committee. Among these,
18
176 passed; 37 failed; 5 reviews were called off; and 1 review was
suspended. Another
24 60 92
2 companies decided to
terminate their IPO plans after passing the offering review meetings. The overall pass rate was
SH MB
Passed Failed
SZ SME
Review suspended
ChiNext
Review called off
80%
11
Hong Kong
Overview of IPO Market 2012 Mainland companies continued to be key drivers of new listings
Number of IPOs by Location of Issuer
Chinese Mainland Hong Kong International
Mainland Companies Dominated in All Respects

42 out of 62 deals were from the Chinese Mainland, up from 57% to 68% y-o-y IPO volume picked up to HK$81.1 billion, representing a 90% (2011: 40%) rise in the proceeds raised in the market.
5%
27% 68%
International Listings Shrunk Substantially

Deal activities were relatively quiet and declined sharply by 67% to three. IPO volume shattered and dropped 97% to HK$6.27 billion. List of authorised jurisdictions for listing was expanded with the addition of Delaware, U.S. and the Republic of Korea.
12
Overview of the Two IPO Markets 2012

Both IPO average first-day returns dropped
Hong Kong Average first-day performance was +6.0%, which was higher than the inflation. On a y-o-y comparison, it has increased by 0.1% from +5.9%. Top and worst IPO performers on the listing days were both from the GEM, at +87% and -27% respectively. Chinese Mainland Average first-day performance increased by 5.2% from a return of +21.4% to +26.6% y-o-y. Both top and worst IPO performers on the listing days were from the SZ SME Board. They generated firstday returns at +627% and -26% respectively.
HK IPO Top Five Best/ Worst Performers

Haitian Hydropower China Assurance Finance Sunley Holdings Juda International Vision Fame
A-share IPO Top Five Best/ Worst Performers

Zhejiang Shibao
87% 59% 42% 39% 33%

China City Railway Xiwang Special Steel Qualipak Dynam Japan Pegasus Entertainment 0% 20% 40% 60% 80%
627%
221% China Molybdenum 138% 103% 94% -26% -17% -17% -15% -14%
100% -50% Jiajia Food Chengdu Leejun Jiangsu Yuxing Film Technology Yinbang Clad Material Ningbo Cixing 50% 150% 250% 350% 450% 550% 650% Epoxy Base Electronic Material
Loncin Industries Bluedon
-27% -20% -11% -10% -9%

-40% -20%
13

Market valuation took a drubbing
P/E multiples of Hong Kong new listings hurt by falling market valuation 29 deals or 51% of the new listings had singledigit P/E multiples. Health care & pharmaceutical sector topped the league with 18 times of average historical multiples when listed. P/E multiples of A-share new listings plunged upon regulatory policies of lowering exceptionally high P/E ratios 112 deals or 73% of the listings had 20 to 40 times P/E multiples. Companies from the technology, media and telecommunications sector ranked top with about 62 times multiples when listed.
P/E Multiples of HK IPOs
P/E Multiples of A-share IPOs
8% 16% 49% 35% 73%
19%
x < 5 times
5 times < x < 10 times
x > 10 times
x < 20 times
20 times < x < 40 times
x > 40 times
14

Valuation of A-share market sloped closer to Hong Kong
(Times) 50 45 40
Average P/E Multiples
35 30 25 20 15 10 5 0
2009 Q1 9 13 19 25 2009 Q2 13 34 25 36 2009 Q3 16 33 24 35 2009 Q4 18 39 29 47 2010 Q1 17 43 28 41 2010 Q2 15 29 18 32 2010 Q3 16 33 20 40 2010 Q4 17 31 22 45 2011 Q1 12 26 23 36 2011 Q2 12 24 16 31 2011 Q3 9 20 14 27 2011 Q4 10 22 13 23 2012 Q1 10 18 14 23 2012 Q2 9 17 12 23 2012 Q3 9 17 11 21 2012 Q4 11 18 12 22
11x
HKEx - MB HKEx - GEM SH MB SZ SME

Source: HKEx
15

Dwindling appetite dried market in all dimensions and top five IPOs shrunk
Hong Kong Issuer 2012 1. 2. 3. 4. 5. 2011 1. 2. 3. 4. 5. Glencore International PRADA S.p.A. Shanghai Pharmaceuticals Chow Tai Fook Jewellery Group CITIC Securities 77,746 19,227 16,014 15,991 14,247 The People's Insurance Company (Group) of China Haitong Securities Inner Mongolia Yitai Coal Sunshine Oilsands Shanghai Fosun Pharmaceutical 27,607 14,383 7,009 4,487 3,966 Proceeds Raised (HK$ million) 2012 1. 2. 3. 4. 5. 2011 1. 2. 3. 4. 5. Sinohydro. Group Sinovel Wind Power Diversity Automobile Founder Securities China Hainan Rubber 13,500 9,459 6,300 5,850 4,708 China Comm. Construction Citic Heavy Industries Solareast Ci Xing Ao Kang 5,000 3,199 2,150 2,135 2,066 Chinese Mainland Proceeds Raised (RMB million)
Issuer
Source: HKEx, CSRC, Deloitte Analysis
16

Two of the global largest IPOs came from Hong Kong, nil from Mainland
Facebook (NASDAQ) Japan Airlines (Tokyo) Santander Mexico (NYSE/Mexico) PICC (HKEx) FELDA Global Ventures (Malaysia) IHH Healthcare (Malaysia) BTG Pactual (Brazil) Telefonica Deutschland (Frankfurt) Haitong Securities (HKEx) MegaFon (London) 15.1 14.5 14.4 14.2 16.5 32.0 27.6 25.5 65.8 124.5
10% 10% 5% 5% 10% 10%
20%
of the largest are listed in Hong Kong 20%
10%
20
40
Year 2012
77.7
60 80 IPO Proceeds
London
100
120
140
(HK$ billion) Brazil NASDAQ NYSE Mexico Japan Frankfurt
Hong Kong
Malaysia
Glencore International (HKEx/London) 42.4 34.0 29.5 Hutichison Port Holdings Trust (Singapore) Bankia (Spain) HCA Holdings (NYSE) 22.3 19.2 16.4 16.0 16.0 15.7 Kinder Morgan (NYSE) Prada (HKEx) Sinohydro Group (SH MB) Shanghai Pharmaceutical (HKEx) Chow Tai Fook (HKEx) New China Life Insurance (HKEx/SH MB)
15%
20%
of the largest are listed/dually listed in Hong Kong 10% 10% 5%
40%
90
(HK$ billion) Singapore Spain
80
NYSE
70
60
50 40 30 IPO Proceeds
20
10
Year 2011
Hong Kong
London
Shanghai
Source: HKEx, London Stock Exchange, NASDAQ, Tokyo Stock Exchange, Singapore Exchange, Renaissance Capital and Deloitte Analysis and exclude proceeds from SPACs
17
Hong Kong
IPO Deal Size Analysis In 2012, five deals raised an aggregate of HK$57 billion, which accounted for 64% of the total funds raised during the year.
Deal Size of HK MB IPOs
Mega (>US$1b) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Large (US$1b>x>US$0.5b) Medium (US$0.2b>x>US$0.5b) Small (<US$0.2b)
6 11
2 2
3 10 7 2
7 11 1 2
2010 2011 Total funds raised: HK$270b
Glencore PRADA Shanghai Pharmaceuticals Chow Tai Fook CITIC Securities MGM China Hui Xian REIT New China Life Insurance Samsonite Sun Art Retail Group HKT
2007 Total funds raised: HK$295b

CITIC Bank China Railway Group Country Garden SOHO China Sino-Ocean Land Fosun International Alibaba.com Sinotrans Shipping Sinotruk Belle International China Molybdenum

China Railway Construction Want Want China

Minsheng Banking Corporation China Pacific Insurance China Longyuan Power Sands China Metallurgical Corporation of China Wynn Macau Glorious Property Sinopharm Group China Zhongwang Longfor Properties
Total funds raised: HK$449b

AIA Group Agricultural Bank of China RUSAL Zoomlion Chongqing Rural Commercial Bank Rongsheng Heavy Industries Xinjiang Goldwind Science & Technology

PICC Haitong Securities Inner Mongolia Yitai Coal Sunshine Oilsands Shanghai Fosun Pharmaceutical
11 IPOs raised HK$164b

18
Hong Kong
IPO Deal Size Analysis Average deal size was HK$1,015 million for MB and HK$94 million for GEM
Deal Size of HK MB New IPOs (excluding US$1 billion mega-deals)
(HK$ billion)
140 120
Large (US$1b>x>US$0.5b)
Medium (US$0.2b>x>US$0.5b)
Small (<US$0.2b)
Average
(HK$ billion) 2.5
1.9 Average Proceeds Raised 2.0 1.6
Proceeds Raised
100 80
1.5
1.6
1.1
60 40
7%
1.0 2012
1.5
1.0
0.5
20 0
0.0 2007 2008 2009 2010 2011
67 deals
25 deals
50 deals
80 deals
58 deals
131
billion
37
billion
78
billion
128
billion
64
billion
46 deals
HK$
HK$
HK$
HK$
HK$
HK$
47
billion
19

IPO Deal Size Analysis Majorities were smaller deals with the six largest ones raising an aggregate of RMB17 billion, which accounted for merely 16% of the total funds raised.
Deal size of A-share IPOs
Mega (>RMB5b)
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Large (RMB5b>x>RMB1b)
Medium (RMB1b>x>RMB0.5b)
Small (<RMB0.5b)
6 3 9 8
2009 2010
4 3
1
2011
2012
Total funds raised: RMB191b

China State Construction Metallurgical Corporation of China China CNR Corporation China Shipbuilding Industry China Merchants Securities Everbright Securities 6 IPOs raised RMB123b

Agricultural Bank of China China Everbright Bank Hua Tai Securities China First Heavy Industries China XD Group Ningbo Port China National Chemical Engineering Hepalink Kelun Pharmaceuticals 9 IPOs raised RMB143b

Sinohydro Sinovel Wind Group Pang Da Automobile Trade Founder Securities

China Communications Construction Citic Heavy Industries Solareast Ci Xing Ao Kang BROS
4 IPOs raised RMB35b
6 IPOs raised RMB17b

20

IPO Deal Size Analysis Average deal size was RMB1.3 billion for MB, RMB635 million for SME Board, and RMB475 million for ChiNext respectively.
Deal size of A-share New IPOs (Excluding RMB$5 billion mega-deals)
(RMB billion)
300 250
Large (RMB5b>x>RMB1b)
Medium (RMB1b>x>RMB0.5b)
Small (<RMB0.5b)
Average
(RMB billion) 1.2
1.0 0.7
0.9
Proceeds Raised
200 150 100 50 0
28%
0.6
Average Proceeds Raised
1.0 0.8 0.6 0.4 0.2 0.0
2009
2010
2011
2012
68
billion
338
billion
247
billion
153 deals
93 deals
277 deals
RMB
338 deals
RMB
RMB
RMB
98
billion
21
Hong Kong
Eighty percent of the IPOs were priced at and below the mid-point with almost half at the low-end of the range.
IPO Pricing in 2012 IPO Pricing in 2011
8%
Top of the Indicative Range
10% 15%
12% 42%
Above the Mid-Point of the Indicative Range At and Below the MidPoint of the Indicative Range Bottom of the Indicative Range
45%
38%
30%
22
Hong Kong
Liquidity retreated amid poor market visibility
Best-received IPOs in terms of Over-subscription Rate
2,500
launched were under-subscribed.

1,500
For the well-received ones,
73
23
1,000
(2011: 43%)
% of them
57x
500
were over-subscribed for
less than
Source: HKEx, Deloitte Analysis and for Main Board listings only
2011 Milan Station
2012 China Machinery
times.
No. of Times of Over-subscription
38
(2011: 31%)
2,179x
2,000
% of the MB IPOs

IPO over-subscription rate remained astonishing amid poor sentiment and market slowdown
Best-received IPOs in terms of Over-subscription Rate
All 42
(2011: All)
800
742x
700
IPOs were over-subscribed.

479x
(2011: 47%)
600
500
400
% of them
300
were over-subscribed for
200
over
100
100
times.
0 2011 Shenke Slide Bearing 2012 Zhejiang Shibao
24
No. of Times of Over-subscription
Hong Kong
Number of IPOs by Industry Manufacturing sectors topped the ranking
2012
3% 16% 20%
Energy & Resources Financial Services
2011
2% 8% 14% 10% 32% 6%
Health Care & Pharmaceutical
8% 16% 3% 11% 23%
Manufacturing Property Retail & Consumer Business
22% 6%
Technology, Media & Telecommunications (TMT) Others
25

Number of IPOs by Industry Manufacturing sector dominated IPO activities of the A-share market
2012
3% 1% 4% 6% 23%
Energy & Resources Financial Services Health Care & Pharmaceutical Manufacturing Property
2011
1% 18% 4% 1% 8%
14%
14%
46% 3%
Retail & Consumer Business TMT Others
2%
52%
26
Hong Kong
Proceeds from financial services sector took up nearly half of the proceeds raised
2012
Others TMT Retail & Consumer Business Property Manufacturing Health Care & Pharmaceutical Financial Services Energy & Resources 0 Energy & Resources 10 20 22.17 30 40 50 (HK$ billion) Manufacturing Property Retail & Consumer Business TMT Others 4.19 42.62 0.16 1.28 5.94 4.07 9.40
4.6% 10.5% 4.7%
1.3%0.2% 6.5% 24.7%
Financial Services Led with Haitong and PICC Offerings
47.5%
Financial Services
2011
3.9%
Others TMT 0.03 10.59 80.66 15.03 11.08 18.27 32.72
Source: HKEx, Deloitte Analysis; including proceeds raised from the offerings of Hui Xian REIT, and the international offering of Glencore International Plc. in 2011
Energy & 29.7% Resources Well Ahead of Others with Glencore Offering 5.5%
4.1% 6.7% 12.1%
Retail & Consumer Business
38.0%
Property Manufacturing Health Care & Pharmaceutical Financial Services Energy & Resources
(HK$ billion)
103.02 0 20 40 60 80 100 120
27

Manufacturing sector was driving 44% of the total proceeds
2012
Others TMT Retail & Consumer Business Property Manufacturing Health Care & Pharmaceutical Financial Services Energy & Resources 0 Energy & Resources 5.49 1.74 4.01 10 20 30 40 50 (RMB billion) Manufacturing Property Retail & Consumer Business TMT Others 7.50 44.98 15.97 2.41 21.33
2.3% 1.7% 3.9% 5.3% 20.6%
15.3%
Manufacturing Topped the Rank
43.6%
7.3%
Financial Services
2011
0.3%3.9% 4.5% 13.0% 6.5%
Others TMT Retail & Consumer Business Property 18.91 132.01 18.47 12.79 11.04 20 40 60 80 100 120 140
0.98 36.64 51.62
18.3% Manufacturing
Well Ahead of Others

6.7%
Manufacturing Health Care & Pharmaceutical Financial Services
46.8%
Energy & Resources
(RMB billion) 0
28
Hong Kong
Outlook - challenges overshadowed the market
Eurozone worries
whether the beleaguered countries could turnaround or even would get worsened; right policies to energize the contracting economy
Looming U.S. fiscal cliff
HK IPO Market
how this will play out and affect the U.S. economic recovery
Pace of Chinas recovery

direction and magnitude of economic stimulus policy
Keen competitions from other bourses in the region

HKEx is at the crossroads

Outlook - challenges clouding the market Worsening corporate earnings
Cooling down of Chinese economy Ongoing unlock of large volume of restricted shares
A- share IPO Market
The three high issue*
Liquidity drain pressure due to astonishing IPO backlog

*High P/E, proceeds and offer price
30

Significant policies, further new procedures are expected to be launched in early 2013, bringing further changes to the market
Details of listing process and applications under review Increase of US$ and RMB QFII quotas to US$80 billion and RMB270 billion, respectively
Transparency of Listing Process
Speed Up Approval of QFIIs
Reduction of Securities Transaction Costs
Three rounds of securities transaction cost cut to 0.02%
Lower requirements for QFII application
A-share Market
IPO Approval Pace Tightened Delisting Rules
Delisting of issuers having negative net asset values or annual operating income of less than RMB10 million for three consecutive years
Regulate deal flows to prevent significant drain of market liquidity
IPO Pricing Reform
Details of responsibilities for issuers, intermediary institutions, legal firms, Invitation to five to 10 accounting firms and rating individuals investors agencies to participate in pricing procedures
31
Hong Kong
Outlook key listing trends
Streamlining of Secondary Listing Process
International listing Secondary listing or listing by introduction
Mainland Enterprises Go Global

Mainland POEs
Relaxation of listing requirements of H-share under CEPA* IX Market reform of B-share switching from B-share listing to H-share listing in Hong Kong H-share offerings of A-share companies
RMB Internationalisation
Relaxation of H-share in raising RMB in Hong Kong RMB-denominated IPOs RMB-denominated exchange traded funds tracking Hong Kong stocks
Listing of Home-grown Brands

Family business expansion for increased brand recognition Wealth management to pass onto the second generation
Support outbound M&A activities

* Closer Economic Partnership Arrangement (CEPA)
HKExs Acquisition of London Metal Exchange

International capital market for mining and natural resources companies
32

Outlook key listing trends
State policy driven process

Align with State development plan Areas where government funding will flow, and where private funding is expected and priority business sectors will advance
Priority development of cultural, and agricultural, forestry, fishing and livestock industries
Seven strategic emerging sectors
Western region development New Third Board over-the-counter market

Hong Kong
Outlook - sector allocation for IPO Financial services, property, and retail & consumer sectors will be the foci.
3rd Year of 12th FiveYear Plan
Financial Services Banks & Securities Firms
Going-out New urbanisation

Infrastructure-related Property Stimulate economy through tremendous infrastructure investment and boosting new urbanisation Macro-economic control on this sector is expected to have bottomed out Overall property market sentiment gets stabilised Funding needs for project development
Well-off society
2015
Income re-distribution initiatives to even and increase average income per capita Funding for M&A activities to fuel expansion as valuation gets reasonable Tap into the Mainland market, the second largest economy and luxury goods consumption market
Year
Meet capital and liquidity ratio alongside with business expansion Accelerate growth from expansion of QFII/ RQFII quota Expand products, business and international coverage
34
Retail & Consumer Business

Outlook - sector allocation for IPO Strategic emerging industries under the 12th Five-Year Plan are the hot picks.
Agricultural, forestry, fishing and livestock
35
Hong Kongs IPO Market in 2013

Growth surges in China and the U.S removes the overcast in the market. A new chapter in the development for Hong Kong with booming pipelines will begin. We are cautiously optimistic about the IPO deal flow and volume for 2013.
Around
raising approximately HK$
70-80 100-150
(2012: 62 new listings, 13% - 29%)
companies will be listed during the year,
billion. (2012: HK$89.8 billion, 11% - 67%)
Source: HKEx, Deloitte Estimate
36
The Chinese Mainlands IPO Market in 2013

Market transformation develops alongside with tight liquidity and weak corporate earnings will stem IPO activity and good valuation. The pipeline is fully stocked and the IPOs are expected to go full steam ahead as soon as the market confidence restores.
Around
150
(2012: 154 new listings, 2.6%)
companies will be listed by the end of 2013,
raising approximately RMB
(2012: RMB103.4 billion, 3%)
100
billion.
Source: CSRC, Deloitte Estimate
37
Hong Kong and Chinese Mainland IPO Markets 2012 Review and 2013 Outlook Hong Kong and Chinese Mainland IPO Markets -2012 Review and 2013 Outlook
Deloittes Market Share in Hong Kong IPO in 2012

Number of IPOs IPO Proceeds Raised
29% 71% 68%
32%
Deloitte
Non-Deloitte
Deloitte
Non-Deloitte
38
Deloitte is their reporting accountant

Major deals completed in Hong Kong in 2012
Christine International Holdings Ltd. The company is a leading bakery chain operator in China. It offers a range of bakery products through an expansive multi-channel retail network, including 898 retail outlets in 22 cities. Sunshine Oilsands Ltd. The company is the largest holder of non-partnered oil sands leases by area in the Athabasca oil sands region and Canada. It is the largest international listing in 2012 on HKEx, raising HK$4.5 billion. Jiangnan Group Ltd. It is a leading manufacturer of wires and cables for power transmission, distribution systems and electrical equipment in China. Trigiant Group Ltd. The group is one of the leading manufacturers engaged in research, development, sales of RF coaxial cables series and other related accessories for use in mobile communications and telecommunications equipment in China.
Wonderful Sky Financial Group Holdings Ltd. The company is principally engaged in the provision of financial public relations services in Hong Kong.
Haitong Securities Co., Ltd. It is a leading fullservice securities firm in China with an integrated business platform, extensive branch network and substantial customer base. It raised HK$14.4 billion proceeds through its H-share listing.
39

Major deals completed in Hong Kong in 2012
China Nonferrous Mining Corporation Ltd. The company is a leading fast growing and vertically integrated copper producer that focuses on mining, ore processing, leaching, smelting and sale of copper. It is based in Zambia. CIFI Holdings (Group) Co. Ltd. The company is engaged in the property development, property investment and property management business in China. Wanguo International Mining Group Ltd The company is principally engaged in the business of mining, ore processing and sale of the concentrates products in China. China Yongda Automobiles Services Holdings Ltd. It is a leading passenger vehicle retailer and comprehensive service provider in China. It focuses on offering automobiles from luxury and ultraluxury brands.
Casablanca Group Ltd. The company is one of the leading branded bedding products companies in China and Hong Kong.
Zhengzhou Coal Mining Machinery Group Company Ltd. It is a leading comprehensive coal mining and excavating equipment manufacturer in China. Its H-share IPO raised HK$2.3 billion.
40

Recently completed A-share listings
China Molybdenum Co., Ltd. It is specialized in mining, dressing, smelting and processing of molybdenum and tungsten. Beijing Cuiwei Tower Company Ltd. The company is principally engaged in the development and operation of department store chain on the Chinese Mainland. Universal Scientific Industrial (Shanghai) Company Ltd. It is a global leader in providing services and solutions in electronic product design and manufacturing.
Great Wall Motor Company Limited The company is engaged in the repair of motor vehicles, development and research, manufacturing and sales of vehicle parts.
Agricultural Bank of China Ltd. It is one of the four state-owned banks in China. Its IPO was the largest in the Ashare market in 2009, raising RMB59.6 billion.
Shandong Molong Petroleum Machinery Company Ltd. The company is specialised in the design, research and development, processing, manufacturing and sales in China and petroleum machinery export.
41
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42
Contacts
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Hong Kong and Chinese Mainland IPO Markets 2012 Review and 2013 Outlook

National Public Offering Group Deloitte China 31 December 2012

Sluggish recovery of U.S. economy

2013 Deloitte Touche Tohmatsu

Hong Kongs IPO market plummeted in 1H/2012

new listings, raising HK$

(1H/2011: 38 new listings, raising HK$187.2 billion*)

half-year performance in terms of

proceeds raised since financial tsunami in

Reduced momentum in Mainlands IPO market in 1H/2012

new listings, raising RMB

(1H/2011: 167 new listings, raising RMB173 billion)

Proceeds Raised in 1H/2012 62 54 61 24 16 23 37 24

Proceeds Raised in 1H/2011 83

Source: China Securities Regulatory Commission (CSRC), Deloitte Analysis

2013 Deloitte Touche Tohmatsu

Continuation of U.S. administration

2013 Deloitte Touche Tohmatsu

new listings, raising HK$

(2011: 90 new listings, raising HK$271.4 billion*)

proceeds raised in 2012.

new listings, raising RMB

(2011: 281 new listings, raising RMB282.4 billion)

Proceeds Raised in 2012 101 102

120 100 Proceeds Raised 80 60

20 0 2012 2011 2012 2011 2012 2011

2013 Deloitte Touche Tohmatsu

Hong Kong Shenzhen

in terms of funds raised globally,

200 180 160 140 120 100 80 60 40 20 0

New York Stock Exchange**

Tokyo Stock Exchange

Hong Kong Stock Exchange

Shenzhen Stock Exchange

2013 Deloitte Touche Tohmatsu

Proceeds from IPOs

350 300 Proceeds Raised 250

2013 Deloitte Touche Tohmatsu

The Chinese Mainland

180 160 140 43 40 31 14 26 26 28 25 19 26 22 18 11 120 100 80 60 40 20 0 2012 Q4* Proceeds Raised

2013 Deloitte Touche Tohmatsu

The Chinese Mainland

applications were submitted to the Offering Review Committee. Among these,

Source: CSRC, Deloitte Analysis

2013 Deloitte Touche Tohmatsu

Mainland Companies Dominated in All Respects

International Listings Shrunk Substantially

Source: HKEx, Deloitte Analysis

2013 Deloitte Touche Tohmatsu

Overview of the Two IPO Markets 2012

HK IPO Top Five Best/ Worst Performers

A-share IPO Top Five Best/ Worst Performers

87% 59% 42% 39% 33%

Loncin Industries Bluedon

-27% -20% -11% -10% -9%

Source: HKEx, Deloitte Analysis

2013 Deloitte Touche Tohmatsu

Overview of the Two IPO Markets 2012

P/E Multiples of HK IPOs

P/E Multiples of A-share IPOs

8% 16% 49% 35% 73%

5 times < x < 10 times