Chinese language and Hong Kong flags flutter as screens show the Hold Seng Index outdoors the Change Sq. complicated, which homes the Hong Kong Inventory Change (HKEX), on January 21, 2021 in Hong Kong, China.
China Information Service | China Information Service | Getty Photographs
Hong Kong recorded a notable pickup in itemizing actions this 12 months, as extra Chinese language corporations turned to the town to boost capital and traders grew optimistic after Beijing pledged to assist the offshore market.
The Hong Kong inventory alternate noticed new listings bounce for the primary time after three consecutive years of declines, by way of deal values, in response to knowledge compiled by Dealogic. That included preliminary public choices and extra follow-on share gross sales.
Town’s bourse raised a mixed $10.65 billion throughout 63 offers this 12 months, marking a major improve of greater than 80% in comparison with the $5.89 billion raised throughout 67 in 2023 — which was the bottom since 2001, in response to Dealogic.
As one other signal that corporations and traders are regaining confidence in Hong Kong’s market, the common deal dimension practically doubled from the earlier 12 months to $169 million.
The variety of corporations looking for public flotations in Hong Kong began choosing up within the second half of this 12 months, because the Chinese securities regulator in April pledged to assist the Hong Kong market and facilitate extra IPOs from main mainland corporations.
Beijing’s ramped-up stimulus package deal has additional fueled corporations’ curiosity in elevating capital within the offshore metropolis and lured again some international capital funds, specialists stated.
IPOs alone, Hong Kong is ready to rank fourth globally by way of funds raised this 12 months, according to KPMG, trailing India and the U.S. inventory exchanges.
“There are a whole lot 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.
Regardless of 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.
‘Indicators of life’
For years, itemizing exercise within the Asian monetary hub had declined as geopolitical tensions and better rates of interest globally dampened traders urge for food to purchase into Hong Kong and Chinese language fairness capital market offers.
China’s financial downturn and a cussed housing market disaster additionally raised worries amongst issuers and traders when it got here to corporations valuations.
Investor sentiment has improved this 12 months, particularly towards sectors which might profit from the coverage assist, akin to consumption-related companies, stated Qing Wang, chairman and chief strategist at Shanghai Chongyang Funding Administration.
Midea Group, which sells air conditioners, washing machines, elevators and different shopper 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 traders stay hopeful of its place to profit from Beijing’s “trade-in program,” geared toward encouraging customers and companies to improve present home equipment and gear.
There have been 90 IPO applications pending listing or below processing as of Nov. 29 in response to the alternate’s web site.
Whereas the town may even see a extra lively IPO pipeline in 2025, it’s prone to be a “gradual restoration” somewhat than a “V-shaped” one, stated John Lee, vice chairman and co-head of Asia nation protection at UBS international banking Asia.
To this point this 12 months, mainland traders have purchased $96.4 billion value of Hong Kong shares, surpassing final 12 months’s complete of $42 billion and heading in the direction of the most important 12 months since a $87 billion shopping for spree in 2020, in response to knowledge from Goldman Sachs.
“There may be additionally a return of international 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 nicely. Chinese language autonomous driving agency Horizon Robotics and bottled water maker China Assets Beverage —the 2 largest IPO offers within the metropolis this 12 months — noticed their shares decline by 12% and 11%, respectively, as of Wednesday from provide worth ranges.
Buyers have to see “concrete proof of stimulus coverage effectiveness”, Shanghai Chongyang’s Wang stated. He expects some enchancment in sentiment early into the second quarter subsequent 12 months when the general public corporations begin releasing earnings.
The benchmark Hold Seng Index is heading for its first annual acquire after 4 straight years of declines, surging over 16% to date this 12 months.
Hold Seng Index
That stated, the rally, fueled by Beijing’s large stimulus package deal in late September has misplaced a few of its momentum.
Wanting 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.
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