Chinese and Hong Kong flags flutter as screens show the Hang Seng Index outdoors the Exchange Square complicated, which homes the Hong Kong Stock Exchange (HKEX), on January 21, 2021 in Hong Kong, China.
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Hong Kong recorded a notable pickup in itemizing actions this yr, as extra Chinese firms turned to the town to boost capital and buyers grew optimistic after Beijing pledged to help the offshore market.
The Hong Kong inventory alternate noticed new listings leap for the primary time after three consecutive years of declines, when it comes to deal values, in line with knowledge compiled by Dealogic. That included preliminary public choices and extra follow-on share gross sales.
The metropolis’s bourse raised a mixed $10.65 billion throughout 63 offers this yr, marking a big improve of greater than 80% in comparison with the $5.89 billion raised throughout 67 in 2023 — which was the bottom since 2001, in line with Dealogic.
As one other signal that firms and buyers are regaining confidence in Hong Kong’s market, the common deal dimension almost doubled from the earlier yr to $169 million.
The variety of companies searching for public flotations in Hong Kong began choosing up within the second half of this yr, because the Chinese securities regulator in April pledged to help the Hong Kong market and facilitate extra IPOs from main mainland firms.
Beijing’s ramped-up stimulus bundle has additional fueled firms’ curiosity in elevating capital within the offshore metropolis and lured again some overseas capital funds, specialists stated.
Looking at IPOs alone, Hong Kong is about to rank fourth globally when it comes to funds raised this yr, according to KPMG, trailing India and the U.S. inventory exchanges.
“There are a variety of pent-up demand for capital elevating” since 2022, when the town’s economic system sought to shake off a pandemic-induced slowdown, Andy Maynard, managing director and head of equities at China Renaissance stated in an electronic mail.
Despite some “indicators of life,” Maynard cautioned that solely when “we see continued enchancment within the onshore economic system and geopolitical tensions proceed to melt” can one anticipate an additional pickup in Hong Kong’s IPO actions.
‘Signs of life’
For years, itemizing exercise within the Asian monetary hub had declined as geopolitical tensions and better rates of interest globally dampened buyers urge for food to purchase into Hong Kong and Chinese fairness capital market offers.
China’s financial downturn and a cussed housing market disaster additionally raised worries amongst issuers and buyers when it got here to firms valuations.
Investor sentiment has improved this yr, particularly towards sectors which might profit from the coverage help, akin to consumption-related companies, stated Qing Wang, chairman and chief strategist at Shanghai Chongyang Investment Management.
Midea Group, which sells air conditioners, washing machines, elevators and different client merchandise, in September clinched the town’s largest listing since early 2021. Its shares listed in Hong Kong have jumped over 36% from its provide worth, as buyers stay hopeful of its place to learn from Beijing’s “trade-in program,” geared toward encouraging shoppers and companies to improve present home equipment and tools.
There have been 90 IPO applications pending listing or beneath processing as of Nov. 29 in line with the alternate’s web site.
While the town may even see a extra lively IPO pipeline in 2025, it’s more likely to be a “gradual restoration” quite than a “V-shaped” one, stated John Lee, vice chairman and co-head of Asia nation protection at UBS world banking Asia.
So far this yr, mainland buyers have purchased $96.4 billion value of Hong Kong shares, surpassing final yr’s whole of $42 billion and heading in direction of the most important yr since a $87 billion shopping for spree in 2020, in line with knowledge from Goldman Sachs.
“There can also be a return of overseas long-only [funds] to China [and] Hong Kong equities, although the tempo is gradual,” stated Perris Lee, head of APAC fairness capital market at Ion Analytics.
‘Not a Santa rally’
Not all new listed shares have traded properly. Chinese autonomous driving agency Horizon Robotics and bottled water maker China Resources Beverage —the 2 largest IPO offers within the metropolis this yr — noticed their shares decline by 12% and 11%, respectively, as of Wednesday from provide worth ranges.
Investors must see “concrete proof of stimulus coverage effectiveness”, Shanghai Chongyang’s Wang stated. He expects some enchancment in sentiment early into the second quarter subsequent yr when the general public firms begin releasing earnings.
The benchmark Hang Seng Index is heading for its first annual achieve after 4 straight years of declines, surging over 16% to date this yr.
Hang Seng Index
That stated, the rally, fueled by Beijing’s huge stimulus bundle in late September has misplaced a few of its momentum.
Looking forward, China Renaissance’s Maynard stated that whereas the Hong Kong inventory market could have turned the nook, he didn’t see “any prospect of a Santa rally.” The market remained “trapped and range-bound” as Beijing’s stimulus bulletins since September have underwhelmed.
