China Metallurgical and Sinopharm Group lead a list of 15 firms hoping to raise nearly 18 billion dollars in Hong Kong and Shanghai by October 31, and more than 80 initial public offerings (IPOs) are in the pipeline for the next year, according to analysts and media reports.

"The pick up in the economy, pick up in stock markets and plenty of liquidity -- all that makes for a good concoction," Andy Mantel, founder and chief executive of Pacific Sun Investment Management in Hong Kong, told AFP.

Companies were forced to shelve their listing plans after the collapse of US investment bank Lehman Brothers in September last year sent global financial markets into freefall and prompted China's securities regulator to suspend IPOs in Shanghai and Shenzhen for nine months.

In the first eight months of 2009, 10 firms raised 3.3 billion dollars in IPOs in Hong Kong -- about half the number and value for the same period last year, according to the Royal Bank of Scotland, citing data provider Dealogic.

Dealogic said 23 companies have made their debuts on the Shanghai and Shenzhen stock exchanges since the IPO suspension was lifted in June.

"It was virtually dead from the beginning of last year until the first half this year," said Kathleen Wong, an attorney specialising in finance and restructuring at the Shanghai offices of law firm Allen and Overy.

Wong said the strong rebound on stock markets this year -- Hong Kong has surged 45 percent and Shanghai has piled on 60 percent -- as well as fears the government could reinstate IPO restrictions has spurred companies into action.

"Everyone is rushing to be the first. You don't want to be the last because you don't know when this window will shut and you don't know whether the appetite will last," Wong said.

Some companies are racing to meet deadlines by which they must launch their IPOs to avoid defaulting on pre-IPO financing from foreign institutions, Wong added.

Foreign lenders often require companies to list within two years, or repay the money.

"As a consequence of not doing an IPO by the cut-off date... they could face debt repayments and they don't necessarily have the money," Wong said.

There are concerns that the flood of IPOs, combined with fears the government will eventually curb bank lending, could put pressure on share prices. Shanghai fell 22 percent in August on fears of tighter credit.

"I'm wary when you see so many companies trying to list at the same time," Mantel said.

"We are cautious because of the... amount of money expected to be absorbed by this new stock.

"The biggest risk facing the market is liquidity and monetary policy -- in the first half there was a lot of loans going into the share market but for the rest of this year, lending will be curtailed."

As competition intensifies, companies which dominate their sectors are likely to draw the most support, particularly from foreign investors seeking exposure to the recovering Chinese economy, according to Kenneth Tseung, head of equity capital markets at the Royal Bank of Scotland in Hong Kong.

"If I were a fund manager, I would like to put money in this part of the world. That's where the growth is," Tseung said.

China Metallurgical, an engineering and construction company, said Friday it had raised 2.8 billion dollars through its domestic IPO, the nation's second largest this year. It also plans to raise up to 2.9 billion in Hong Kong.

Sinopharm, China's largest pharmaceutical products distributor by sales, is seeking to raise 1.12 billion dollars in a Hong Kong IPO.

But Tseung warned that stock markets had priced in a "perfect scenario" for the Chinese economy and a hiccup in the recovery could trigger losses.

"If anything does not match the expectations, the equity markets will start moving south," he said.

earlier related report
China stimulus plan questioned at 'Summer Davos'
China's widely praised stimulus plan has come under attack here at the "Summer Davos" meet from economists who say the massive government spending is aggravating imbalances in the giant economy.

China said on Friday that it was on track to meet its target of eight percent economic growth in 2009 -- the rate it says it needs to ward off social unrest -- thanks largely to the massive programme of government cash handouts.

Beijing envisages four trillion yuan (590 billion dollars) of investment over two years, including 1.18 trillion by the central government, mostly in infrastructure.

But professor Xu Xiaonian of the China Europe International Business School in Shanghai said the strategy supports structural imbalances -- over-investment, surplus production capacity, and under-consumption -- while neglecting long-term objectives.

"China's investment is already too strong. The US consumes too much but China consumes too little... Millions are poured into infrastructure... and distortion will continue to worsen," Xu said at the third World Economic Forum in the northeastern Chinese city of Dalian, which ended Saturday.

Public investment accounts for nearly 45 percent of China's GDP, often benefitting industries already burdened with overcapacity, such as steel and cement, with consumption making up just 35 percent.

"China will lose steam and slow down. Eight percent growth seems easy to get but will soon become a luxury. Overcapacity is already a problem... and everybody will feel the pinch," said Xu.

"The recovery is not sustainable; the government is extending credit like crazy."

Besides the huge governmental stimulus package, commercial banks also have been lending money this year on a massive scale.

In the first half of the year, loans amounted to 7.37 trillion yuan, a line of credit that "is not sustainable," said Stephen Roach, Asia chairman of Morgan Stanley.

The worry is not only that some of these loans are bad and might not be repaid, but also where the money is going -- into the real economy or into stock or property speculation.

"I would not call it recovery," said Xu. "In Chinese, we have a saying about drinking poison to extinguish thirst.

"We need to say goodbye to past success and look for innovation."

Analysts also said China needs other drivers for economic recovery once the government cash injections run out.

"We need to increase structural reform and reduce dependence on external demand," said Yu Yongding of China's Academy of Social Sciences, a think tank.

Roach agreed.

"China needs more private consumption. Chinese households have a very high savings rate," he said, citing one estimate that put the rate at 37 percent.

"The missing link is the social safety network," he added. "The government has moved very slowly" to provide support for the country's sick and elderly, he said.

But in Dalian, Prime Minister Wen Jiabao rejected these criticisms, citing government initiatives including a trial retirement programme, spending on housing, health sector reform, and a massive three-year investment in the medical industry.

He said by the end of June the majority of government stimulus money was going into social programmes -- including subsidised housing -- with less than 20 percent being spent on infrastructure.

"We are not only thinking of how to meet the (eight percent growth) target this year but also how to achieve long term economic growth," he added.

earlier related report
Asia's finance houses leading jobs market recovery: analysts
Financial institutions are leading a recovery in the Asian jobs market as the region emerges from recession more forcefully than expected, analysts say.

While overall unemployment is still rising a year after the collapse of investment bank Lehman Brothers, economists say it is the finance sector which is bucking the trend.

"I'd be as bullish as to say we are in a recovery," said Mike Game, the CEO of Hong Kong-based recruitment firm Hudson's Asia operation.

"We have seen quite a marked turnaround in activity in China in particular. We are also seeing strength in Singapore."

Lehman Brothers filed for bankruptcy protection on September 15, 2008, as it buckled under the weight of the collapse in US sub-prime mortgages, in a scandal that became emblematic of the worldwide financial crisis.

"What happened during the downturn was that a lot of firms couldn't be seen to not lay people off but a lot were reluctant to let people go," said Matthew Hoyle, founder of Matthew Hoyle Financial Markets, a specialist headhunter for the banking and hedge fund industries, based in Hong Kong.

"Now those birds are coming home to roost and there has been a complete reversal in the hiring market. We are now seeing people who were laid off coming back and demanding signing-on fees."

Hoyle said business had tripled since the height of the downturn, adding: "It wasn't entirely unexpected but I couldn't have imagined in my wildest dreams it would be this intense."

Official government statistics in Hong Kong back up Hoyle's optimism.

Although the latest available finance sector employment figures show a 0.6 percent drop in the first quarter of 2009 from the same period a year earlier, they are up on the last quarter of 2008 by 0.4 percent -- equivalent to nearly 700 jobs.

Analysts say the financial institutions stopped hiring altogether in the final three months of last year, before beginning to replace key positions at the start of this year and then taking on staff to meet growing demand in the second quarter.

One trader of a blue chip financial institution in Hong Kong, who asked not to be named, told AFP he had managed to find work with a new firm after being made redundant in the downturn.

"Even though I've been in my new job for about three months, I had two headhunters call up out of the blue in the last two days with multiple roles for derivatives traders at bulge bracket US banks," he said.

"And a number of other jobs on the go are typically smaller banks and brokerages, picking their moment to get into markets they had previously missed the bus on and lift some modestly priced experience to set up new operations."

HSBC is recruiting more than 100 staff members in Hong Kong, The New York Times reported at the start of September, while in mainland China it plans to add 1,000 employees this year, and a similar number next year.

Most of the jobs that are coming back are replacements of previously cut positions, not new jobs, market experts say. But Ian Strutton, director of Manpower Professional Hong Kong, said 20 percent were new positions.

"Generally it is accepted that when a recession comes it is the financial services that are first to react and cut investment, and when the economy starts to recover they are the first to start reinvesting, and they do it quickly," he said.

A recent survey of 815 Hong Kong employers published by recruitment agency Manpower showed that there were marginally more finance sector companies planning to increase staff in the fourth quarter than there were firms planning more downsizing.

"We see an emerging demand from corporate banking, showing a gradual improvement in job opportunities, especially wealth management," said Lancy Chui, general manager of Manpower Hong Kong and Macau.

In China, one recruitment company said the outlook for the Chinese financial services sector was positive as the world's third largest economy was recovering and investor confidence had improved.

Demand for people with finance industry experience had increased in the past two months, Thomas Zhou, partner at Dacare Consulting in Beijing, told AFP.

"Market sentiment in China has picked up since the stock market started to go up. There's been a lot of (recruitment) activity," Zhou said.

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