2012 proved dire for Asia's key hub, but Elizabeth Broomhall finds advisers banking on a 2013 rebound

It's only the second week of January and already everyone is placing bets on the health of Hong Kong's initial public offering (IPO) market, still used by many local advisers as the bellwether of confidence in the region's economy.

While the accountants are gearing up for a strong recovery, forecasting around 80 new listings valued at approximately HK$120bn (£9.5bn) during 2013, most lawyers are taking a characteristically cautious approach while hoping for the best.

Of course, almost anything would be better than last year, one of the worst on recent record for Hong Kong listings. During the period, the city's bourse dropped from the world number one for three years running to fourth place, according to Dealogic.

It even fell behind Tokyo, an exchange that failed to make the top 10 a year earlier. By the end of December, the Hong Kong Stock Exchange (HKSE) had recorded just 64 new IPOs valued at HK$89.8bn (£7.1bn), down from 101 listings in 2011 topping HK$271.4bn (£21.6bn).

Some international law firms – which were hit particularly hard given the heavy focus they had placed on Asian capital markets work – were forced to cut staff to reduce overheads in response to grim trading conditions.

But most analysts are more positive about the year ahead. They say the market has benefited from improved investor confidence and liquidity in the latter part of 2012, driven by increased political certainty in the US and China.

By the same token, the consensus view is that the risks of a eurozone break-up are receding, even if much of Europe's economy remains mired in recession.

As such, the three biggest risks to the global economy and regional confidence have at least receded, which the optimists hope will prime the Asian region to pick up pace in 2013.

Indeed, Q4 saw the close of Hong Kong's largest offering for 2012 – the HK$24bn (£1.9bn) IPO of the People's Insurance Company (Group) of China, not to mention smaller listings such as that of Shanghai developer CIFI Holdings (which raised HK$1.6bn (£132m)).

Last week, Reuters reported that casino operator Macau Legend Development is planning a Hong Kong IPO of up to HK$6.2bn (£494m) in the second quarter.

Top-rated Kirkland & Ellis capital markets partner Dominic Tsun (pictured) sees plenty to support a relative revival: "I'm upbeat about the IPO market this year. The Hang Seng is over 23,000, and there's a pipeline of deals that are just waiting for the window.

"If a number of these get done, then confidence will improve significantly – it's always been a momentum game here and, historically, the trending-up happens very quickly."

Among the accountants, PricewaterhouseCoopers (PwC) has also taken a positive attitude.

Edmond Chan, PwC capital market services group partner, said in a recent report that, given the market conditions and uncertainty, it was impressive that Hong Kong had managed to maintain its position as a leading listing hub last year.

"[In 2013] we expect more and more small and medium-sized enterprises to seek a listing in Hong Kong," he says.

Also important is the recent decision by securities watchdog, the China Securities Regulatory Commission (CSRC), to lower the threshold for mainland companies seeking to go public in Hong Kong.

Gary Lock, a capital markets partner at Herbert Smith Freehills, says the new rules, which came into effect on 1 January, could potentially attract hundreds of new candidates to Hong Kong in a bid to raise funds.

"Poor financial conditions due to inadequacies within the banking system in China and lending to corporates means many companies don't have enough money, and they need cash," he says.

"Potentially more than 800 Chinese companies, which have been in the queue to list A-shares [traded in the mainland] on the Chinese markets, could come to list H-shares in Hong Kong following the policy change."

Other lawyers refer to the companies that are currently migrating to Hong Kong from Shanghai and Shenzhen bourses, where several companies have continued to perform poorly.

One such company, China International Marine Containers, converted its PRC-traded shares to Hong Kong-traded securities last year, and also considering such a move is the mainland's largest developer by revenue, China Vanke. Such a trend could provide a welcome boost to Hong Kong, advisers believe.

Perhaps a final reason for industry experts to take an optimistic outlook is the renewed efforts by the HKSE to attract international companies.

In its own words, the exchange plans to "clarify and streamline the requirements for listing overseas companies, and to provide a disclosure-based approach to secondary listings of seasoned issuers from reputable overseas exchanges".

Robert Cleaver, a capital markets partner with Linklaters, says he is expecting an impact particularly in the luxury goods sector, which has remained fairly resilient throughout the recent economic uncertainty and which has begun to show an interest in the Hong Kong market.

He comments: "The [HKSE] is very conscious of the competition they face from other exchanges internationally and they want to make themselves more attractive to issuers."

Nevertheless, Cleaver stresses that such positive developments still face huge challenges amid a turbulent global economy and that any shift in activity would likely occur in the second half of the year.

Edward Bradley, a capital markets partner at Clifford Chance, agrees that while there are certainly positive signs in the market with better political conditions, and what seems to be a large pipeline of new deals, circumstances continue to remain volatile.

His take: "The IPO market is still so fragile that I think we are going to see transactions that depend a lot more on cornerstone investors.

"The big signs that some confidence will return are the US situation getting better, Europe getting better and China producing some positive news, but it is still pretty shaky."

• Related: Honeymoon period for foreign firms in Hong Kong seems over as IPO slowdown prompts fee drop