The London Stock Exchange has been leapfrogged by Hong Kong as the preferred international location for initial public offerings.

Companies listing in Hong Kong this year have raised a record $39.5 billion (£20 billion), more than 17 per cent of the total capital raised worldwide.

The Hong Kong stock exchange has gained from a push by China’s Government for stock market flotations that it believes will help to develop the country’s corporate culture and capital markets. Hong Kong owes its strong performance this year to two blockbuster IPOs — the $22 billion debut by Industrial & Commercial Bank of China and the Bank of China’s $9.7 billion deal.

Hong Kong’s stock exchange will see the debut tomorrow of a $1.69 billion offering by China Coal Energy, a coal miner that is one of eight companies due to hit the market before the end of the year.

Analysts say that the increased flow of deals through Hong Kong reflects the growing appetite of foreign investors who are comfortable with buying Asian stock.

Chinese companies have raised more than $46 billion this year from stock markets worldwide.

However, the London Stock Exchange came a close second to Hong Kong with $34 billion worth of deals as it stole a march on its US rivals, according to a survey by Ernst & Young, using data compliled by Dealogic.

The London markets, including the Alternative Investment Market, raised more than $40 billion, the survey said.

Five of the largest 20 global IPOs this year took place in London. These included Standard Life, which raised $4.4 billion this July, and Debenhams, which netted $1.9 billion in May.

More than half that sum was raised by 71 companies based outside the UK as foreign businesses flocked to London. The amount raised by overseas companies in London has soared by 69 per cent over the past year to $22 billion, Ernst & Young said.

The bulk of the money flowed into Rosneft, the Russian state-run oil company which this summer raised more than $10 billion.

The number of foreign companies raising money in the United States slipped from 28, raising $8 billion, in 2004 to 26, raising $6 billion, this year, the Big Four accounting firm said.

Companies say that they find the UK’s regulatory environment welcoming, because they are intimidated by the threat of shareholder litigation in the United States and by the cost of complying with America’s Sarbanes-Oxley legislation on corporate governance.

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