Research Proposal on "Hong Kong Financial Market"

Research Proposal 20 pages (6345 words) Sources: 1+

[EXCERPT] . . . .

financial market of Hong Kong in the airline transportation arena. Our central question is whether or not this a good time for an airline based in Hong Kong to issue its IPO. While the Hong Kong and market has just went for a downturn, it is turning around have weathered nicely and is turning around.. Major Hong Kong airlines such as Cathay Pacific Airways have counted upon this pending recovery and went forward with their own IPO recently in order to expand its Executive Business Class Service. For this reason, we will list the reasons and the advantages for this option and the key points for a successful move to an IPO.

In general, the present is still a good time for the movement towards the IPO because of the resiliency of the mainland China market and will likely get even better as we move into year 2012. Indeed, it appears that while the downturn in the European markets have affected Asia, the China and Hong Kong, it has been contained. Conservative companies such as Cathay Pacific Airways and Hong Kong Airlines have decided to stay the course, hoping the economy will become more than nominal. They have strong economic plans that are centered upon serving a profitable niche of the first class passengers that will bump up the profit margins of the airlines.

They know that it takes money to make money and to differentiate their companies in form the others in terms of customer service in order to buy customer brand name loyalty. However, once they achieve this loyalty, they will be able to leverage their market share favorably against the western airlines that have cut service to cut costs. The IPO offerings on the Hong Kong stock exchange have been made attractive as a calm financial port of call in the shadow of the huge and still growing mainland Chinese economy. This relative clam is very attractive in a day when the ongoing crisis in the Eurozone and the ongoing uncertainty in United States and U.K. Markets continues to scare investors about venturing into the present economic market situation. The size and stability of the Chinese market is very much a key that will have to be examined in further depth.

Indeed, it appears that Cathay Pacific Airways and Hong Kong Airlines may represent the types of airline transportation companies that can weather the storm in the relative strength of the Hong Kong Hang Sen financial market. By pairing up with the stronger Chinese economy and by centering its efforts around the premium first class market, Hong Kong has come up with a plan to go long in the treacherous waters of the present world recessional economy. They have bet that 2012 will likely be the year that things do turn around.

Research Proposal

In the wake of this study, more research needs to be done regarding the Hong Kong financial markets and the airline industry and IPO offerings as year 2012 unfolds. The situation of course may change at any time for the better for the worst. There needs to be more market research in the effectiveness of the spending of money raised in recent Hong Kong IPO offerings to fund airline Premium Executive Service. Further, there needs to be more research into the ability of the Hong Kong airline companies to leverage market share through the acquisition of increased customer brand loyalty.

Analysis

Often, a small company can get some excellent guidance from observing what the larger companies are doing and the marketing campaigns that they are launching. At the present time, a number of companies are either going IPO or expanding into the target market of airline transportation. The airline industry requires an enormous amount of capital investment and the IPO option is frequently the best way to go to raise a lot of finance capital in a very short period of time.

A consideration of a few of these companies should give a number of prescient case studies to consider. If so many companies are considering entering the market at this time in an attempt to raise venture capital, one would assume that it is a safe time for a company to do so.

The Rush to the IPO -The Case of Air Lease Corporation

A number of companies have voiced their public support for the Hong Kong market lately by launching brand these new IPO initiatives. This would indicate a great faith in the continued strength of the market despite the present economic downturn in America and in Europe, especially in light of the crisis vis a vis the Eurozone Greek, Spanish and Italian debt crises.

The Air Lease Corporation announced the launch of an initial public offering of 25 million shares of its Class A Common Stock. The estimated offering price is between 25 dollars and 28 dollars per share. Air Lease Corporation Class A Common Stock has lately been approved for its listing on the New York Stock Exchange under its symbol "AL." The company's underwriters also have the option to purchase additional stock up to an additional 3,750,000 shares of the Class A Common Stock to cover its over-allotments ("Air lease corporation," 2011).

The HNA Group Company Limited (HNA) and its partner Bravia Capital have further announced the appointment of Mr. Donald Boylan as the new Chief Executive Officer of Hong Kong Aviation Capital (HKAC). The Bravia company is a wholly owned subsidiary of HNA and also an affiliate of Bravia. The new CEO appointment was effective immediately. After the company's latest focus on stabilizing its Allco portfolio ( it acquired HKAC in Jan-2010), it is interested in re-establishing its and strengthening its banking relationships and in also managing the further remarketing and/or lease extensions of eight aircraft. Therefore, HKAC is refocused on the continued acquisition of these new aircraft. The company therefore also expects to further acquire up to an additional twenty-five aircraft in 2011. There have also been seven new reported A320 aircraft purchases that were finalized as well as three that have only recently been delivered to Indigo Airlines and Wizz Air. In the leasing of stocks, the shares in the Aerocentury company continued their very sharp downward turning, dropping a further 10.9%. In recent trading, the shares in the company have further lost 18.2% (ibid).

The Case of Hong Kong Air

In a recent report, Hong Kong Airlines Ltd. further expects to win a private-equity investment by the early quarter of 2012 as it prepares for its initial public offering of as much as one billion dollars and will therefore challenge its neighbor Cathay Pacific Airways Ltd. In order to help pay for this expansion, the Hong Kong airline plans to hold an initial public offering in 2012. Then it may additionally raise from anywhere from $500 million to $1 billion. The carrier could also take the full control of its affiliate the Hong Kong Express company ahead of the share sale. It has been reported that Hong Kong Air has made a net income of approximately HK$110 million ($14 million USD ) in 2010. This was its first annual profit and it may have doubled in 2011. Company press releases revealed that passenger numbers may likely have spiked to 4 million from over the 2 million mark. The airline has reported that it also expects its cargo unit (that started only last year) to account for thirty percent of its revenue in 2011-year from twenty percent as it adds some more freighter flights (Li, 2011).

Cathay Pacific Airways, with a company group fleet of approximately 170 planes flew some 26.8 million passengers in 2010. It further boosted its profits to HK$14 billion from approximately HK$4.7 billion a year earlier in 2009. This helped it by raising travel and asset sales. The health of the company is illustrated by its purchases. Cathay Pacific Airways ordered some 25 Boeing and Airbus SAS planes recently. Cathay Pacific Airways is spending some HK$1 billion as it is rolling out its new business- class cabins. It is also renovating the existing lounges, says incoming Chief Executive Officer John Slosar recently. According to Slosar, the carrier is very used to competition from its experience in battling international carriers in its home Asian market (ibid.)

The Hong Kong Air and Hong Kong Express companies operate a total of 18 Airbus A330-200s and Boeing 737-800s airplanes. These include some freighters and Hong Kong Air agreed to order some 32 Boeing 787s recently. These included two more for VIP operations and also six 777 freighter aircraft. The company also has some 30 A320s and also 27 twin-aisle planes on order at the Airbus company (ibid.).

Hainan Airlines

Grand China Airlines, which is the parent of China's fourth-biggest carrier, said that it planned to raise over HK$10 billion in the first half of 2011. This was while Hong Kong Airlines (controlled by Hainan Airlines) was simultaneously picking up underwriters for a planned HK$5 billion IPO release in the third quarter of 2011.… READ MORE

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