AFTER a dismal start, initial public offering (IPO) activity in Hong Kong looks poised for a better second half as Beijing steps up support for the financial hub.
The number of IPO filings in Hong Kong rose in the past two months, while cancellations of listing applications on the mainland more than tripled from a year earlier after authorities vowed to tighten stock market supervision. The financial hub saw 22 IPOs announced since Apr 12, an 83 per cent increase from the same period last year, according to Bloomberg-compiled data.
China’s pledge to speed up approvals for listings outside of the mainland bodes well for new share sales in Hong Kong, which has seen a 33 per cent year-on-year drop in proceeds raised since the start of 2024. Stricter rules for domestic debuts and a stalled rally in Chinese shares may also drive more major firms to the financial hub.
“In view of the improved activities of the Hong Kong secondary market in the second quarter of 2024 and the A-Share market policy, I am optimistic about the Hong Kong IPO market in the second half,” said Billy Au, corporate & securities partner at Mayer Brown.
As Beijing tightens stock-listing criteria at home, more technology companies are expected to make their way to Hong Kong. Artificial intelligence (AI) and robotics tech developer QuantumPharm debuted this month after the first IPO under the so-called chapter 18C scheme, while Sunwoda Electric Vehicle Battery, – which was initially considering an offering in Shenzhen – is eyeing a listing in the city.
Other listings on investors’ radar in the second half include Urban Revivo Fashion, a Guangzhou-based company that aims to rival established brands such as Inditex’s Zara.
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“I’m particularly interested in the innovation and AI sector, that’s been an area for growth,” said Julia Charlton, the principal partner at Charltons law firm and a member of the listing review committee of Hong Kong’s exchange.
Recent performances of newcomers in Hong Kong also added to optimism in the market. About 75 per cent of the firms that listed in 2024 rose in their inaugural session, versus just 44 per cent in the same period last year.
To be sure, persistently high interest rates and geopolitical woes may weigh on sentiment in the greater China markets. This year’s proceeds from IPOs in the city only amounted to US$1.5 billion, less than half of the amount raised in India, Bloomberg-compiled data showed.
Still, with Chinese authorities prioritising stability domestically, Hong Kong’s market “is likely to be more active this year”, said John Lee, the co-head of Asia country coverage and global banking at UBS. BLOOMBERG
