SHANGHAI, Jan 4 Initial public stock offers on Shanghai's stock market are expected to to

SHANGHAI, Jan 4 (Reuters) Initial public stock offers on Shanghai's stock market are expected to total nearly US$36 billion in 2007, overtaking Hong Kong as Asia's biggest centre for IPOs, a leading consultancy said on Thursday.

Many Hong Kong-listed companies are planning Shanghai IPOs this year, while mainland Chinese regulators are also encouraging more domestic IPOs, which offers Shanghai, China's biggest city, a rare opportunity to overtake rival Hong Kong.

''With more overseas firms listing in Shanghai, it will also help to strengthen the city's position of becoming a major global financial centre,'' said Yang Yongmin, a Shanghai-based partner at international auditing firm Ernst&Young [ERNY.UL].

Ernst&Young estimated that 280 billion yuan in capital would be raised through IPOs on the Shanghai Stock Exchange in 2007, slightly higher than on the Hong Kong bourse.

Around 60 Chinese and international firms raised HK$325.4 billion (US$41.8 billion) through initial public offerings in Hong Kong in 2006, a record high versus HK$165 billion the previous year, according to Ernst&Young.

The rapid increase in capital raised in Hong Kong was led by several large deals last year, including the world's biggest-ever IPO, by Industrial and Commercial Bank of China , which raised almost US$22 billion through its dual listing in Hong Kong and Shanghai.

''We don't expect any large IPO projects like ICBC in 2007, though the strong IPO growth will remain in Hong Kong,'' said Terence Ho, an Ernst&Young partner for China IPO business.

In 2006, a total of 146.3 billion yuan ($18.74 billion) in funds was raised through IPOs in Shanghai, compared with only 2.4 billion yuan in 2005 as Beijing suspended fund-raisings in domestic markets to pave the way for its national stock reform.

''A plus H is the trend,'' said Yuan, referring to dual listings of A shares in Shanghai and H shares in Hong Kong.

''As long as the company can meet the criteria of A plus H, it will do A plus H,'' said Yuan, adding many red chips are looking for avenues to float shares in Shanghai in the new year.

Red chips are Chinese firms listed in Hong Kong. Chinese stock regulators are proposing new regulations to cover ''China Depositary Receipts'' (CDRs), an instrument that would allow Hong Kong firms to float shares on mainland bourses.

''Things like CDRs are very positive signals,'' Yuan added.

Another reason to attract more IPOs to Shanghai rather than Hong Kong in 2007 is a strong domestic market performance -- China's benchmark index gained 130 percent in 2006.

''Global investors continue to feel optimistic at China stock markets and this can be also a good reason for Shanghai IPOs,'' said Philip Leung, Ernst&Young's IPO leader in the Far East region, who expected the Shanghai index to keep rising after it hit a new intra-day high of 2,847.615 points on Monday.

($1=7.805 Yuan) ($1=HK$7.78) REUTERS PKS DS1445