Mainland entrepreneurs are increasingly looking to list their companies in Hong Kong to raise funds, Head of China & International of Hong Kong Exchange and Clearing Ltd., Richard Peng, told the audience during the Financial/Investment Services Session at the China Business Conference 2002.

"Listing in Hong Kong is a very hot topic for entrepreneurs in the Mainland," he said, adding that the Mainland's stock markets are mostly still off-limits to the country's private firms.

But for investors in Hong Kong, the transparency and credibility of Mainland-based privately-owned companies is a concern, following the scandals of Euro-Asia Agriculture (Holdings), Chaoda Modern Agriculture (Holdings).

Between 1986 and 1997, the value of funds raised here for Mainland enterprises accounted for 31 per cent of the total HK$247 billion funds raised. From 1998 to September 2002, however, this proportion had more than doubled to 64 per cent, or HK$509 billion.

The rapid growth means that private Mainland enterprises are not only playing a very important role in the economic development in China, but they have also become the target clients for Hong Kong services industries.

Mainland private companies listing on Hong Kong's GEM board have enjoyed great success due to four main reasons, he said. The first is investor confidence. Privately-owned Mainland companies remain attractive to investors, despite the recent scandals surrounding some of them.

A survey conducted by Finance Asia showed that 71 per cent of investors are confident about China's economic prospects over the next five years. Only 5.9 per cent of those surveyed, by contrast, had confidence in Singapore's prospects. Secondly, having already established a strong foothold in the China market, investors think Mainland firms have a head start over newcomers. Thirdly, most firms have good corporate governance.

"The fourth, and most significant reason, is because Hong Kong is their domestic market. Stocks of most mainland-based enterprises listed on the NASDAQ have registered lack-luster performances because New York is not their domestic market," he said.