Summer in Hong Kong is coming quietly this year, but it is better than summer before the beginning of summer. The average daily maximum temperature is close to 30 degrees Celsius, which is full of the meaning of midsummer. However, Hong Kong's IPO market suddenly encountered a "cold winter" in the first quarter of this year. In April, Deloitte released the "Chinese Mainland and Hong Kong IPO Market 2024 Q1 Review and Prospects" report, which showed that in the first quarter of this year, only 12 Hong Kong IPOs were listed, raising a total of HK$4.73 billion, and the number of initial public offerings (IPOs) and the amount of funds raised were both the lowest in the past 10 years.
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Hong Kong's IPO in the first quarter raised only 4.7 billion, the tenth in the world
The IPO proceeds of the Hong Kong stock market in the first quarter were only HK$4.7 billion, down by 30% year-on-year, hitting a new low since the same period in 2009, underperforming emerging markets such as India and Saudi Arabia, and ranking 10th in the world in terms of total funds raised. Some domestic media quoted investment banking insiders as saying that investment banks are facing a "wave of layoffs", and employees are ready to be "fired" at any time.
According to the Securities Times, among the 12 new listings, most of the Chinese securities firms with a high market share are Chinese securities firms, and only one foreign institution serves as the sponsor to underwrite the Suteng Juchuang and Lianlian Digital listings, which is JPMorgan Chase.
"The overall global coordinator plays the most important role in the IPO process, and needs to be responsible for finding cornerstone investors and anchoring investors, but the current Hong Kong stock market is too weak and illiquid. Therefore, once the foreign underwriter cannot contact enough investors who are willing to subscribe, it can only choose to withdraw. A local brokerage investment bank in Hong Kong revealed.
Looking back at the first quarter of this year, there were only small IPOs listed in Hong Kong, and there was no return of Chinese concept stocks, nor a lack of new listings on the GEM board. Of the 12 IPOs listed during the quarter, 3 of them "dived" on the first day of listing, namely Zhongshen Construction (02503), USA-China Jiahe (02453) and Lianlian Digital (02598).
Judging from the listing situation in the first quarter, there was no new listing at all in February. Compared with the 70 new listings on the main board of the Hong Kong stock market in 2023, there were also no new listings in February last year, and it was also in August. For the full year of 2023, a total of HK$46.2 billion was raised, representing a 20% decrease in the number of listings and a 56% decrease in the amount of funds raised compared to the same period in 2022.
Cainiao Smart Logistics Network, a logistics subsidiary of Alibaba Group that was scheduled to list in Hong Kong in the near future, was called to suspend its IPO application in late March. This has added to the already sluggish Hong Kong IPO market.
In addition, the number of IPOs listed in Hong Kong in the first quarter of this year were all from Chinese mainland, Hong Kong and Macao, and no overseas companies were listed in Hong Kong.
According to the data for the full year of 2023, in the first quarter of 2024, the New York Stock Exchange topped the list with HK$33.6 billion in terms of new share proceeds, with 12 stocks listed during the quarter. It was followed by the Nasdaq exchange, which raised HK$29.5 billion in 25 new listings during the quarter. In third place is the SIX Swiss Exchange, which raised HK$19.9 billion with a new share in Galderma, the parent company of Cetaphil and a skin care and beauty giant. The National Stock Exchange of India ranked fourth, with 60 IPOs raising HK$17.8 billion in the first quarter, while the Shanghai Stock Exchange ranked fifth, with 11 IPOs raising HK$16.2 billion.
This series of data shows that the Hong Kong IPO market seems to be no longer in its halo. However, the forecast data of various institutions show that Hong Kong's IPO market will turn the tide in the second half of the year and be reborn, which will increase significantly compared with last year.
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Many institutions predict the recovery of Hong Kong IPOs in the second half of the year
Deloitte concludes with a forecast that about 80 new listings will be listed in Hong Kong in 2024, raising about HK$100 billion.
The report said that looking back on the first quarter of this year, the trend of the global capital market has not been able to get rid of the impact of negative factors such as the Russia-Ukraine conflict, the tension in the Middle East, and the delay in the Fed's interest rate cut. Deloitte predicts that the Hong Kong IPO market will eventually recover further as the Federal Reserve cuts interest rates later in the year to repatriate capital, the Hong Kong government introduces more measures to promote the liquidity of the stock market, the mainland continues to roll out economic improvement measures, and the rebound of capital in the Middle East and geopolitical uncertainty in the US election.
KPMG's "Chinese Mainland and Hong Kong IPO Markets 2023 Review and 2024 Outlook" pointed out that the introduction of Chapter 18C for Specialist Technology Companies by the Hong Kong Government has helped to increase the interest of various Specialist Technology Companies in listing in Hong Kong. The GEM listing reform also provides new financing options for high-growth and high-quality start-up SMEs in Hong Kong and the Greater Bay Area.
Greg Guyett, chief executive of global banking and capital markets at HSBC, was quoted by Bloomberg as saying that Hong Kong's IPO market has a chance to recover as soon as the second half of this year.
According to CBI's analysis in the report "Hong Kong IPO and Listing Applications – 2024 Q1 Highlights", the number of applications received by the Exchange in the first quarter reached 64, an increase of 23% year-on-year, of which 29 were new applicants applying for listing for the first time.
On February 28 this year, the Hong Kong government announced a new "Budget", Financial Secretary Paul Chan Mo-po said that the recommendations of the Task Force on Promoting Stock Market Liquidity will be implemented at full speed, and a number of medium- and long-term measures will be announced, including improving the listing mechanism and optimizing the trading mechanism.
"I am very confident in the Hong Kong stock market, as there is diversification in the Middle East business community, and they are showing strong interest in investing in Asia, Chinese mainland and Hong Kong, and I believe that these emerging markets can become a new source of funding. Chen Maobo said earlier when attending the World Economic Forum's annual meeting in Davos, Switzerland.
Nowadays, those who use a single data to clamore that Hong Kong's IPO has bottomed out, Hong Kong's economic recovery is slim, and foreign capital has withdrawn from Hong Kong is a big pair of attitudes that have nothing to do with themselves. However, it is still too early to make such a statement, and it is more practical to wait until the end of the year to shatter the rumors with beautiful data.
Figure | Information Services Department of the HKSAR Government
Text | Liu Yanling
Director of the New Media Department of the Hong Kong Economic Herald
This article is an original manuscript produced by the Hong Kong Economic Herald
Reproduction is subject to authorization and the source is indicated