The Hong Kong Stock Exchange is expected to become one of the major stock exchanges in the world with a high concentration of mining and natural resources companies as PricewaterhouseCoopers (PwC) expects 10 to 15 mining and natural resources- related companies to list in Hong Kong in the next 12 months.
The number of mining and natural resources-related IPOs has increased by over 3 times from 2008 to 2009 (from 3 IPOs to 13 IPOs) with funds raised increased by over 140 times. This year alone, up until 26 October 2010, there were seven mining and natural resources related-listings, with a total of HK$36 billion in funds raised.
There are over 250 mining and natural resources-related companies listed on the Hong Kong Stock Exchange currently. The market capitalisation of the companies in this sector has increased over 35 times since 1999.
"Strong fundamentals on the demand side and restrictive new supply suggest that the sharp u-turn during 2009 by the global mining industry is a trend that is likely to continue in 2010 and beyond. China is a key consumer of mining commodities and the growth in that country is spurring the largest increase in mineral demand since the industrial revolution," says Tim Goldsmith, PwC global mining industry leader, and Benson Wong, PwC Hong Kong assurance partner.
In terms of mergers and acquisitions activity, natural resources are the main industry target for Chinese investors overseas. 14 major resources deals were announced in the first half of 2010, the largest being Sinopec's US$4.7 billion acquisition of a 9% stake in Syncrude from ConocoPhillips. Another notable investment was China Investment Corporation's double investment in PennWest Energy which amounted to US$1.2 billion in total. While Australia is identified as the main target destination, Africa is growing in prominence for Chinese resources investors.
According to Goldsmith, natural resources continues to be the priority industry M&A target for Chinese investors overseas, a trend that is in line with the nation's need for resources to support the engine of economic growth.
Wong adds that Chinese companies are looking for resources assets to fulfil its insatiable demand and to secure long-term supply. "Despite the sharp fall in deal values in 2009, Chinese investment was notably strong, accounting for 3 of the top 10 deals by value last year. We are confident the upward trend will continue into next year," says Wong.
PwC also believes HKEx has made a huge effort to attract overseas mining and natural resources companies to list in Hong Kong. The bourse also helps mainland mining companies to raise funds from foreign investors, making it a great listing platform for the mining and natural resources sector around the globe.