Despite a slowdown in IPO activity, Chinese companies led global initial public offering activity in the second quarter in both number of deals and funds raised, Ernst & Young said in a report released Thursday in Beijing.

The Global IPO Market Research Report said Chinese firms completed 108 IPOs and raised US$20.4 billion, representing 28.6 percent of global deals and 31.6 percent of funds raised around the world.

In the first half of 2011, Hong Kong Exchanges and Clearing Ltd (HKEx) raised US$23.6 billion with 35 deals, the highest fundraising total for the first two quarters of a year in more than ten years, the report said.

Paul Go, managing partner at Ernst & Young, said that seven of the 20 biggest IPOs were listed in Hong Kong. Glencore, Prada SpA, Shanghai Pharmaceutical, MGM China, Hui Xian REIT, Samsonite and Huaneng New Energy all chose Hong Kong for their listing, he said.

The three biggest IPOs accounted for 22 percent of global capital raised in the second quarter, and they were all listed on the Hong Kong exchange, Go said.

"Swiss commodities trader Glencore International's IPO raised US$10 billion, which is the largest IPO globally so far this year and is also the largest non-Asian IPO completed on HKEx [the Hong Kong Exchange] on record," he said.

Italian fashion house Prada SpA, the second largest IPO in the second quarter, raised US$2.14 billion. China's Shanghai Pharmaceutical holdings came in third with US$2.06 billion, the report said.

"Chinese issuers dominated the global IPO market; US$20.4 billion represents a 24 percent increase in total proceeds from the second quarter in 2010," Go said.

Meanwhile, international IPOs by Chinese enterprises on U.S. exchanges continued to grow. Sophie Chen, assurance partner at Ernst & Young, told China.org.cn: "There were 13 deals which raised US$5.1 billion in Q2 and seven of them were from Chinese issuers, raising US$1.6 billion."

In addition, the Shenzhen Stock Exchange (SZSE), including the SME board and the ChiNext board, recorded 144 deals in the first half of 2011, making it the top stock exchange globally by number of deals.

IPO activity on the Taiwan Stock Exchange (TWSE) was flat in the first half of 2011 with 13 deals, according to the report.

IPO outlook

The report showed that both the number and fundraising value of IPOs in Chinese mainland's A-share market in the first half of 2011 fell from the same period last year.

"Chinese IPO activity has slowed down, with investors concerned by commodity and housing prices inflation," Go said. "However, the Chinese IPO pipeline is still very strong, containing large state-owned enterprises and mid-cap companies."

Ivan Tong, assurance partner at Ernst & Young, said despite the continued uncertainty of a global economic recovery, IPOs remained at the heart of many companies' growth strategies.

"As the global IPO pipeline continues to build, we expect a strong second half for new offerings from high profile issuers," Tong said. "We also predict a strong second half for IPO activity in China, and that China will continue to lead global IPO activity in 2011."

A number of Chinese firms are taking another door into equity markets. Since 2005, more than 150 Chinese enterprises have completed reverse takeovers in U.S., buying already-listed firms and using them as a shell to make their company public. By comparison, only a small number of Chinese companies took to the main board for a U.S. listing.

"Influenced by America's short selling system and the recent credit crisis of some Chinese enterprises, more and more Chinese companies will choose to go public directly instead of by reverse takeover, a commonly adopted method in the past," Chen said.

Chen stressed that the Hong Kong exchange had evolved as a leading platform for international IPO activity. Whether the Hong Kong bourse can regain its top position as the top IPO fundraising market in 2011 will depend on the capital market conditions.

"In second half of 2011, Chinese mainland companies will still be the major players in terms of IPO activity in Hong Kong," Chen said. "There are also likely to be more cross-border IPOs of overseas companies."

According to the report, the Taiwan Stock Exchange has been active in attracting mainland and overseas companies and focusing on Taiwan-owned enterprises expanding abroad. More mainland-funded, Taiwan-owned companies registered abroad planned to make listings in Taiwan.

"Cross-border financing will be an important trend of Taiwan capital markets," Go said.

In consideration of Taiwan's high-tech industry and cluster development advantage, Taiwan local authorities launched a high-tech and innovation industry financing platform to build a science and technology capital market.

"Information, biotechnology, medical care and green energy will be important industries in Taiwan," Go said. "More enterprises in these important industries will be listed there."