The Hong Kong stock exchange is fast becoming a haven for foreign companies seeking to increase their exposure to cash-rich Asia.
Despite global weakness for initial public offerings, foreign names including Swiss mining firm Glencore International, Italian fashion house Prada and U.S. luggage maker Samsonite premiered on the Hong Kong exchange last year. Analysts expect Italian motorcycle maker Ducati and U.K. jeweler Graff Diamonds to launch IPOs in Hong Kong this year.
All are looking for ways to boost their sales and attract a swelling Asian middle class that has the desire — and increasingly the means — to buy consumer goods.
Foreign companies are "going where the money is," says Mark Mobius, executive chairman of mutual fund firm Franklin Templeton Investments. "It makes sense for companies that are expanding in the Chinese market to get a listing in Hong Kong" because it boosts their visibility.
Companies have long sought to list their shares overseas, in Europe and the U.S., as they seek access to international markets. But as Asia's economies boom, more companies' attention is shifting to the East.
Coach, the U.S. handbag maker, listed in Hong Kong in December through a secondary offering, rather than by raising capital through an IPO. The listing will "raise awareness of the Coach brand" in China and throughout Asia, the company's largest geographic opportunity, CEO Lew Frankfort said.
Foreign listings — which accounted for more than half of the $36.1 billion in IPO funds the Hong Kong exchange raised in 2011 — helped make the exchange the world's largest IPO market last year for the third time in a row, according to Dealogic, a data-tracking firm.
The New York Stock Exchange, the second-largest venue for IPOs, raised $31.4 billion, and the London Stock Exchange raised $18.3 billion in IPO funds in 2011.
The number of foreign firms on the Hong Kong exchange rose 50% to 24 last year.
Still, IPO volume on the Hong Kong exchange fell nearly 47% in 2011 from 2010, and 2012 could be another tough year as the slowing Chinese economy and the European debt crisis weigh on Asia's investors.
The Hong Kong exchange is aggressively courting foreign firms, which could help insulate it from a slowdown. One way it has done so is by making it easier for overseas firms to list by recognizing a growing number of countries where issuers can be incorporated.
Many foreign firms choose to list in Hong Kong because they expect that being closer to Asia's fast-growing markets will drive demand for their shares and possibly give them a higher valuation, says Mary Lee, research associate at IPOX Schuster, a financial services firm in Chicago.
That's not always the case. Currently, Asia-listed stocks are cheaper on average than those in the U.S., according to Robert Horrocks, chief investment officer at Matthews Asia. Asian stocks, excluding those in Japan, are trading at 10 times the forward price-to-earnings ratio, based on the upcoming 12 months of earnings, while U.S. stocks are trading at 12.5 times forward P-E, he estimates.