London’s capital markets saw a huge upswing in the valuation of IPOs in the second quarter of 2007, buoyed by the two biggest flotations in Europe.

IPO values in London jumped by 129% year on year in Q2, led by VTB Bank’s euro4.7 billion [£3.18 billion] and real estate company AFI Development’s euro1.1 billion flotations on the Main Market.

These admissions ensured London was the largest market in Europe in terms of offering value and volume in the quarter with 102 IPOs raising euro14.8 billion, compared with 108 IPOs raising euro6.45 billion in 2006, according to PricewaterhouseCoopers’ quarterly IPO Watch Europe survey.

Furthermore, London was not alone in enjoying an uptick in IPO numbers in Q2. Overall in Europe there were 254 IPOs, an increase of 10% on the 230 recorded in the same period in 2006 and 80% up on Q1 of 2007. The Nordic OMX Exchange and Borsa Italiana in particular enjoyed bullish volumes.

The total offering value of IPOs in Europe was euro27.9 billion in Q2, 10% up on the same quarter of 2006 and 162% up on the first three months of 2007.

“This has been a busy quarter for IPO activity and the increase in IPO value, compared with the first quarter of 2007, reflects the traditional trend for higher activity in the marketplace prior to the summer break,” said Tom Troubridge, head of London capital markets group at PwC. “London’s Main Market continues to be strong, hosting the two largest IPOs of the quarter and attracting 30 of the 40 IPOs from investment companies, the second most active sector in the quarter.”

But while IPO activity in Europe picked up pace in Q2, some analysts are cautious about the prospects for the remainder of 2007. “The pipeline still looks good for the rest of the year with both domestic and international companies signalling their intention to IPO on Europe’s exchanges,” said Richard Weaver, partner in PwC’s London capital markets group. “However, we observe some uncertainty in investor sentiment, which leads us to be more cautious about the prospects for the second half of the year.”