Chinese language and Hong Kong flags flutter as screens show the Hold Seng Index exterior the Trade Sq. advanced, which homes the Hong Kong Inventory Trade (HKEX), on January 21, 2021 in Hong Kong, China.
China Information Service | China Information Service | Getty Photos
Hong Kong recorded a notable pickup in itemizing actions this yr, as extra Chinese language corporations turned to town to lift capital and buyers grew optimistic after Beijing pledged to help the offshore market.
The Hong Kong inventory trade noticed new listings soar for the primary time after three consecutive years of declines, by way of deal values, based on information compiled by Dealogic. That included preliminary public choices and extra follow-on share gross sales.
The town’s bourse raised a mixed $10.65 billion throughout 63 offers this yr, 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, based on Dealogic.
As one other signal that corporations and buyers are regaining confidence in Hong Kong’s market, the typical deal dimension almost doubled from the earlier yr to $169 million.
The variety of corporations in search of public flotations in Hong Kong began choosing up within the second half of this yr, because the Chinese language securities regulator in April pledged to help 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 mentioned.
Taking a look at IPOs alone, Hong Kong is about to rank fourth globally by way of funds raised this yr, based on KPMG, trailing India and the U.S. inventory exchanges.
“There are plenty of pent-up demand for capital elevating” since 2022, when town’s financial system sought to shake off a pandemic-induced slowdown, Andy Maynard, managing director and head of equities at China Renaissance mentioned in an e mail.
Regardless of some “indicators of life,” Maynard cautioned that solely when “we see continued enchancment within the onshore financial system and geopolitical tensions proceed to melt” can one count on 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 buyers 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 buyers when it got here to corporations valuations.
Investor sentiment has improved this yr, particularly towards sectors which might profit from the coverage help, resembling consumption-related companies, mentioned Qing Wang, chairman and chief strategist at Shanghai Chongyang Funding Administration.
Midea Group, which sells air conditioners, washing machines, elevators and different client merchandise, in September clinched town’s largest itemizing since early 2021. Its shares listed in Hong Kong have jumped over 36% from its supply 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 purposes pending itemizing or below processing as of Nov. 29 based on the trade’s web site.
Whereas town might even see a extra lively IPO pipeline in 2025, it’s more likely to be a “gradual restoration” fairly than a “V-shaped” one, mentioned John Lee, vice chairman and co-head of Asia nation protection at UBS international banking Asia.
To this point 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, based on information 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,” mentioned Perris Lee, head of APAC fairness capital market at Ion Analytics.
‘Not a Santa rally’
Not all new listed shares have traded effectively. Chinese language autonomous driving agency Horizon Robotics and bottled water maker China Assets Beverage —the 2 largest IPO offers within the metropolis this yr — noticed their shares decline by 12% and 11%, respectively, as of Wednesday from supply worth ranges.
Traders have to see “concrete proof of stimulus coverage effectiveness”, Shanghai Chongyang’s Wang mentioned. He expects some enchancment in sentiment early into the second quarter subsequent yr when the general public corporations begin releasing earnings.
The benchmark Hold Seng Index is heading for its first annual achieve after 4 straight years of declines, surging over 16% to this point this yr.
Hold Seng Index
That mentioned, the rally, fueled by Beijing’s large stimulus package deal in late September has misplaced a few of its momentum.
Trying forward, China Renaissance’s Maynard mentioned 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.
