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* Equity fees set to jump on bumper year for HK, China IPOs
* Power Assets utility IPO cutback shows investors picky
* Bumpy start but 2014 seen 2nd biggest for mainland IPOs
By Elzio Barreto
HONG KONG, Jan 15 (Reuters) - After three lean years, HongKong bankers are looking forward to a surge in fees in 2014 asthe city regains its swagger with a slew of big-money initialpublic offerings.
With the value of IPOs in Hong Kong seen doubling to over$32 billion this year as major economies pick up steam, GreaterChina could account for more than half of all 2014 investmentbanking fees for the Asia-Pacific region, excluding Japan.
An upsurge in debt offerings and a cautious restart for IPOsin mainland China will also fuel a rise in first-half revenue atinvestment banks. Since 2009 and 2010, when a bumper crop ofdeals helped Hong Kong overtake New York as the world's biggestIPO market, banks have seen equity issuance and fees shrivel.
Tycoon Li Ka-shing's Power Assets Holdings Ltd isleading the pack of 2014's mega-deals with the planned sale ofup to $3.6 billion of shares in an electricity business laterthis month. Handling the sale and booking most fees from it willbe Goldman Sachs Group Inc and HSBC Holdings PLC.
While last year was depressed in terms of IPOs, GreaterChina still accounted for 49 percent of Asia-Pacific ex-Japaninvestment banking fees, according to Thomson Reuters/FreemanConsulting Co estimates. About 36 percent of the $9.86 billionin fees came from equity deals, the data show.
Advisory firm PwC estimates Hong Kong IPOs could raise $32.2billion in 2014, the highest since 2010 and nearly double the2013 tally of $17.1 billion. That would make 2014 thefourth-biggest year on record for new listings in the city,Thomson Reuters data show.
With economic activity improving in the United States, Japanand some countries in Europe, risk appetite and demand for newlistings is expected to grow in 2014, benefiting Hong Kong andChina listings, analysts said.
"Sentiment will be good for IPOs this year," said JasperChan, corporate finance officer at brokerage Phillip Securities,which provides margin loans to retail investors looking to buyinto IPOs. "You can see from the margin amounts, how deals areoversubscribed sometimes more than 1,000 times. You can see howhot the IPO market is now."
INVESTORS STILL PICKY
Deals expected this year include a $5 billion listing fromChinese meat processor Shuanghui International Holdings, andofferings from health and beauty products retailer A.S. Watson &Co Ltd and e-commerce giant Alibaba Group Holding Ltd.
Shuanghui International's deal is expected for the firsthalf of the year. An Alibaba IPO of around $15 billion couldtake place in the second half of the year at the earliest, withHong Kong considered a possible location.
Goldman Sachs and HSBC are handling the A.S. Watson listingand other stock sales as well as the Power Assets deal.
Other banks likely to benefit from the surge include MorganStanley, which is handling the Shuanghui deal with CiticSecurities Co and UBS. Citic should alsobenefit from its position as top underwriter of new listings inmainland China.
While the deal pipeline is full, Power Assets' decision tocut its targeted proceeds by about a third provided evidencethat IPOs will still need to be pitched accurately. The PowerAssets move reflected a lower valuation on the asset being sold, and also a decision by the parent to retain a bigger slice ofthe business.
"It is still a buyers' market. Investors will continue to bechoosy," said Philippe Espinasse, a former equity capitalmarkets banker at both UBS and Nomura. "Issuers will need to berealistic on valuations and, importantly, will need to getsupport from cornerstones to get deals done," said Espinasse,author of "IPO: A Global Guide".
In Hong Kong, IPO bankers typically secure groups ofinstitutional investors who commit to deals, acting as theircornerstones.
The gradual, bumpy resumption of IPOs in Shanghai andShenzhen will also ultimately provide a boost to deal volumes inAsia-Pacific region after zero activity for more than one yearin China.
Chinese companies could to raise 250 billion yuan ($41.3billion) from new listings in Shenzhen and Shanghai exchanges in2014, according to a PwC forecast. That level would make it thesecond-biggest year on record for IPOs in mainland China, thoughthe early days of the restart have been troubled.
The first batch of about 50 companies to list in China inJanuary alone should bring in 44 billion yuan in proceeds,consulting firm EY estimated last month.
