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

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

Source: WFE – World Federation of Exchanges (as of Aug 2007), Nasdaq data as of Jul 2007

HKEx ranks 7th among global exchanges

New York(1st: USD15,590 bil)

Tokyo(2nd: USD4,518 bil)

Hong Kong(7th: USD2,276 bil)

London(5th: USD3,854 bil)

Shanghai(6th: USD2,382 bil)

Singapore(21st: USD483 bil)

Shenzhen(19th: USD707 bil)

4

Total fund raised amount by global stock exchanges in 2006

Source: WFE (Jan – Dec 2006)

World’s largest IPO -

Industrial and Commercial Bank of China LimitedIndustrial and Commercial Bank of China Limited raised about USD16 bil in Hong Kong on 27 Oct 2006

27

Total fund raised (USD bil)

8

Rank

26

IPO equity fund raised (USD bil)

4

Rank

Euronext

Stock Exchange

67

95

3

2

43

56

2

1

103 137 3 NYSE

London

Hong Kong

… …

17 5 Singapore 6 22

5

Global top 5 IPOs from Jan 2005 to Aug 2007 – 3 were listed in Hong Kong

Rank Name of IssuerCountry / Area

of originDate of listing

IPO fund raised

(USD bil)

Inter-national offering

1Industrial and Commercial Bank of China Ltd

Mainland China 10/2006 16.0

2 Bank of China Ltd Mainland China 6/2006 11.2

3 OAO Rosneft Oil Co Russia 7/2006 10.7

4China Construction Bank

Mainland China 10/2005 9.2

5 VTB Bank Russia 5/2007 8.0

Hong Kong can conduct super large IPOs

Source: Bloomberg

91%

91%

93%

6

Competitive P/E ratio among other securities markets

Source: Taiwan Stock Exchange website (as of June 2007)

12London

15Korea

1818

18New York

P/E RatioMarket

Singapore 16

Hong KongHong Kong

7

1,176%

172%

388%

166% 156% 155% 130% 107%

0%

200%

400%

600%

800%

1000%

HK MainlandChina &

HK

Singapore UK Canada USA Korea Japan

Market capitalization (Jul 07) vs GDP (06) ratio

Source : International Monetary Fund & World Federation of Exchange

High % of Market Cap / GDP = High degree of internationalization

8

The Heritage Foundation has rated Hong Kong as…

for 13 consecutive yearsfor 13 consecutive years

NoNo trade barrier Complete freedomComplete freedom of capital flow Well- establishedWell- established rule of law LowLow taxation ExtensiveExtensive banking and service industry that is regulated non-

intrusively and transparent

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…

Source: Research on the Global Financial Centres Index by The City of London Corporation, Mar 2007

“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.”

People

MarketAccess

BusinessEnvironment

InfrastructureGeneral

Competitiveness

No. 1 in Asia & No. 3 in the worldNo. 1 in Asia & No. 3 in the world

10

The Hong Kong market accommodates issuers of different size

80

484452

160

30

0

100

200

300

400

500

<100 mil 100 mil-1 bil 1-10 bil 10-100 bil >100 bil

No. of Companies

Market Capitalization (HKD)Source: HKEx

47% of the listed issuers’

market capitalization is less than

HKD1 bil

Market capitalization of the 1,206 listed Hong Kong companies (as at 31 Aug 2007)

11

0

20

40

60

80

100

120

<100 mil 100 mil-1 bil 1-5 bil >5 bil

Mainland Enterprises

Others

No. of newly listed companies from Jan 2003 – Aug 2007

IPO fund raised(HKD)

% of Total Newly Listed Companies*

28% 39% 24% 9%

Mainland Enterprises 11% 22% 15% 7%

Others 17% 17% 9% 1%

33

67

46

22

50 51

26

4

We have expertise in IPOs of different sizes

Note: Excluding 19 companies which were listed by introduction and 6 Real Estate Investment TrustsSource: HKEx

No. of companies

12

Brokers come from different parts of the world

Number of Overseas Brokers

0

5

10

15

20

25

30

MainlandChina

TaiwanRegion

US Japan Malaysia Singapore Canada France UK Belgium Others

2322

17

3

27

45578

11

Origin of the 132 overseas brokers in Hong Kong

“Others” include brokers from Switzerland, Netherlands, Australia, Germany, Philippines, Thailand, etc

Source: HKEx (as of June 2007)

13

Overseas institutional investors, 39%

Overseas retail investors, 3%

Local institutional investors, 26%

Local retail investors, 27%

Brokers' principal trading, 5%

Listing in Hong Kong provides exposure to a diversified international investor base…

Source: HKEx Cash Market Transaction Survey 2005/06

42% of cash market trading are generated from overseas investors

65% are generated from institutional investors

USA, 26%

UK, 24%

Europe, 23%

Asia, 21%

Others, 6%

14

Overseas fund managed in Hong Kongis set to grow further … partly thanks to QDII

0

200

400

600

800

2001 2002 2003 2004 2005 2006

Sourced from non-HK investorsSourced from HK

70% 63%63%

63%

63%

30% 37%37% 37% 37%

Source: SFC Fund Management Activities Survey 2006

USD bil

Increased by 280% in 5 years

Increased by 280% in 5 years

USD208 bn

USD582 bn

(+25%)

62%

38%

USD791 bn

(+36%)

USD210 bn

(+0%)

USD379 bn

(+80%)

USD465 bn

(+23%)

15

No. of listed companies (as of 31 Aug 2007)

Daily Average Turnover (HKD bil) (Jan – Aug 2007)

Total Mainland Enterprises

Market capitalisation (HKD bil) (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%

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)

.. As well as new listings from the Mainland

Source: HKEx

16

Besides Mainland Chinese companies, we are also a platform open to foreign companies …

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

Companies With foreignshareholders

Japan

Korea Indonesia

Singapore

Malaysia

Thailand

Canada

Taiwan region

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

17

Some of which operate outside of Hong Kong and China

* 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.

Stock Code

Company NameMarket Cap. as of

18 Jul 2007 (USD mil)Place of Operation

678 Star Cruises Ltd. 3,048 N. America

276 Mongolia Energy Corporation Ltd. 2,509 Mongolia

3918 NagaCorp Ltd. 718 Cambodia

2317 Vedan International (Holdings) Ltd. 211 Vietnam

502 Pan Sino International Holdings Ltd.* 71 Indonesia

N. AmericaMongolia

Cambodia

Indonesia

Vietnam

Source: HKEx

18

A and H Shares : the dual listing model in HK

Source: HKEx and FTSE Xinhua Index

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)

Shenzhen

Shanghai

19

A and H Shares : the dual listing model in HK (cont’d)

Source: HKEx and FTSE Xinhua Index

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

Shenzhen

ShanghaiWe are very experienced in

handling listings of companies from an emerging economy

20

Hang Seng Index past performance (Sept 06 – Aug 07)

Source: Bloomberg and HKEx

As of 30/06/2007,

- Hang Seng Index at a record high of 23,984.14 on 31 Aug, an increase of 38% yoy

21

Company

Market

Cap.

(US$ mil)

P/E

(times)

Total Fund Raised

(US$ mil)

Average daily turnover

YTM Aug 07

(US$ mil)

Listing Date

HSBC 211,026 13 21,039 367.5 N/A

Manulife 61,070* 18 13,189 3.0 Sep 99

ICBC 54,232 29 16,060 245.9 Oct 06

Standard Chartered 42,876 18 4,120 5.6 Oct 02

Bank of Communications 25,970 32 2,164 89.5 Jun 05

China Merchants Bank 10,025 55 2,660 88.5 Sep 06

China CITIC Bank 9,548 N/A 4,232 48.2 Apr 07

Fubon Bank 657 16 300 0.8 Nov 93

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

Source: Bloomberg and HKEx

% 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

23Source: Bloomberg and HKEx

Banks & Financial Institutions listed in HK:(1) Industrial and Commercial Bank of China



Average Daily Turnover in 2007: USD 246 mil

Listing Date: 27 Oct 2006



Banks & Financial Institutions listed in HK:(2) Bank of China




Listing Date: 1 Jun 2006



Banks & Financial Institutions listed in HK(3) Bank of Communications







Banks & Financial Institutions listed in HK(4) China Life




Listing Date: 18 Dec 2003



Banks & Financial Institutions listed in HK(5) Ping An Insurance






28

Listing requirements

Main Board – 3 financial criteria1. Profit Test

Profits of 3 years ≥ USD6.4million (HKD50million)

2. Market Cap/Revenue Test(i) Market Cap ≥ USD513million (HKD4billion)

(ii) Revenue of the most recent audited year ≥ USD64million (HKD500million)

3. 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

Listing process

An issuer decides to list

on HKEx

An issuer decides to list

on HKEx

Appointment of sponsors

& other professional

advisors

Appointment of sponsors

& other professional

advisors

Restructuring, preparation of Accountants’

Report, drafting ofprospectus

Restructuring, preparation of Accountants’

Report, drafting ofprospectus

Sponsor submits listing application &

related documentto the Listing

Division of HKEx

Sponsor submits listing application &

related documentto the Listing

Division of HKEx

Successful listing in

Hong Kong

Successful listing in

Hong Kong

Roadshow to promote to investors

before trading commences

Roadshow to promote to investors

before trading commences

Hearing by Listing

Committee

Hearing by Listing

Committee

Review of listing

application by the

Listing Division

Review of listing

application by the

Listing Division

Approval Recommendation

31

To facilitate listings of overseas companies in Hong Kong

- 7 Mar 2007SFC-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

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.”

The HKEx strategic plan 07-09

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: [email protected]

HKEx website: www.hkex.com.hk

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

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