HONG Kong's initial public offering market witnessed a recovery in sentiment in the first quarter of this year when mainland market remained stagnant, an industry report showed today.

A total of 11 companies were listed on the Hong Kong Stock Exchange during the first three months of 2013, down 39 percent from the same period last year, according to a report released by the Deloitte Touche Tohmatsu in Shanghai today.

The newly-listed firms raised an aggregate fund of HK$8.11 billion (US$1.05 billion), an annul decrease of 17 percent, according to the report.

However, despite reduced deal flow and volume, higher IPO prices and full subscription pointed to a recovery in market sentiment.

Almost all of the IPOs were priced above the mid-point of the expected range and more than one-third of them priced at the top of the indicative range, the report showed.

Furthermore, all IPOs were over-subscribed, with average first-day return reaching 21.48 percent, the report said.

"We remain positive about IPO prospects given the improved market sentiment in the first quarter and the smooth transition of mainland's leadership," said Edward Au, co-leader of the National Public Offering Group of Deloitte China.

"Another reason for optimism is its fully stocked IPO pipeline with a number of heavyweight deals likely to be launched from the second quarter onwards," said Au.

Fund raised by mainland companies accounted for about 84 percent of the total IPO proceeds in the Hong Kong market, a 42 percent increase from last year, as the China Securities Regulatory Commission suspended IPO approvals on mainland market and required applicants to self-check their financial documents in an effort to crack down on false disclosures and profit manipulations.

As of March 29, 123 companies have terminated their IPO applications since the financial check was launched in December, leaving the total number of companies waiting for IPO approvals to 765.