MARKET FEVER: The flood of IPOs is being driven by mainland companies' rush to benefit from valuations on the soaring market. -- PHOTO: BLOOMBERG NEWS

The potential sums raised in primary and secondary listings this year underscore the huge liquidity in China's domestic stock market.

It will also heighten fears in Hong Kong, London and New York that they will no longer continue to benefit from hosting mainland initial public offers (IPOs).

The forecast was issued on Wednesday by PricewaterhouseCoopers (PwC).

PwC partner Richard Sun said the firm expected capital raised by A-share listings in Shanghai and Shenzhen to total 400 billion yuan (S$80.2 billion), up from a forecast 200 billion yuan in January.

A-shares are traded in yuan and are open only to Chinese investors and selected foreign institutions.

The flood of IPOs is being driven by mainland companies' rush to benefit from valuations on the soaring stock market. The benchmark Shanghai Composite Index has trebled in the past 18 months.

'This latest forecast is scary,' said a senior Hong Kong banker. 'The authorities in Hong Kong are going to have to work very hard to maintain the dominance and relevance of its bourse.'

IPO issuance last year in Hong Kong (US$41 billion), London (US$39 billion) and New York (US$29 billion) easily outstripped that of China's mainland bourses, which were closed to new listings until last month while market reforms were carried out.

Exchanges in the United States have been particularly concerned that they are missing out on the flood of Chinese IPOs and have blamed US regulatory burdens for discouraging overseas companies from listing in the country.

But efforts to reduce the red tape appear to be having some results. In the year to June 5, there were 11 listings of China and Hong Kong-listed companies in the US, compared with just two in the same period last year, according to Dealogic.

But the sums raised were relatively small, the biggest being LDK Solar, which raised US$469 million.

PwC said that A-share listings in China in the first six months of the year hit 169 billion yuan, with an even stronger IPO pipeline forecast for the rest of the year.

The soaring mainland IPO market is especially worrying for Hong Kong, the preferred listing destination for mainland companies over the past decade. Hong Kong IPOs this year have so far raised HK$102.6 billion (S$20 billion).

China's stock markets are largely out of bounds to foreign investors, whose holdings represent less than 1 per cent of the market capitalisation of all stocks.

The robust market for Chinese IPOs will also frustrate foreign investment banks, which have been largely shut out of underwriting and trading mainland shares.

Only Goldman Sachs and UBS have struck deals enabling them to participate in domestic IPOs, with Washington lobbying Beijing to lift restrictions on investment in domestic securities companies.

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