Hong Kong's IPO outlook brightens with SF Holding, Tong Ren Tang filing applications

Initial public offerings (IPO) on the Hong Kong stock exchange, which slumped to a two-decade low in the year's first half, are set for a revival, with a couple of mainland Chinese firms submitting applications on Friday to raise funds.

Shenzhen-listed SF Holding, the parent of courier operator SF Express, has taken a second stab at raising funds in the city after its initial application filed last August lapsed. It had reportedly sought to raise between US$1 billion and US$2 billion in February, lower than earlier estimates of as much as US$3.3 billion.

SF Holding plans to issue 625.5 million shares in Hong Kong, according to the approval it received from the China Security Regulatory Commission (CSRC) on May 31. In its application on Friday, SF Holding said it would use the proceeds to enhance and upgrade its logistics services in Asia, especially Southeast Asia.

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Beijing Tong Ren Tang Healthcare Investment, China's largest non-public traditional Chinese medicine hospital group, did not disclose the amount it plans to raise from its IPO. The proceeds will be used to upgrade its existing medical institutions up to 2028 through renovation and procurement of advanced medical equipment.

Goldman Sachs, Huatai Financial Holdings and JPMorgan are the sponsors of SF Holding's deal, while CICC is the sole IPO sponsor of Beijing Tong Ren Tang.

SF Holding's potential mega deal is what the Hong Kong primary market needs after fundraising on the main board of the Hong Kong stock exchange totalled US$1.5 billion in the first six months of the year, according to LSEG data released on Friday.

It was 35 per cent lower than a year earlier and the lowest since US$802 million was raised in the first half of 2003, when the severe acute respiratory syndrome virus derailed the city's markets.

The outlook for Hong Kong's IPO market is looking up, Bonnie Chan, the CEO of bourse operator Hong Kong Exchanges and Clearing (HKEX), said in an interview with the Post recently. The HKEX was vetting more than 100 applications, she said.

Hong Kong's benchmark Hang Seng Index has risen 5.5 per cent year to date, signalling potentially better valuations for companies seeking to list in the city.

On Friday, jewellery retailer Laopu Gold, data services provider Tainju Dihe and ride-hailing operator Dida debuted in Hong Kong. However, only Laopu ended the day higher.

China's market regulator CSRC earlier this month said it was working on expediting IPO approvals.

Also on Friday, Singapore-based container depot operator EKH appointed China Galaxy International Securities (Hong Kong), DBS Asia Capital and Quam Securities as overall coordinators for its Hong Kong IPO after mandating Alliance Capital Partners as a sponsor two weeks earlier.

"With a rebound in the Hang Seng Index since mid-April, market liquidity and valuations in Hong Kong improved somewhat in the first half of 2024," Deloitte said in a note on June 21.

An active pipeline of more than 100 IPO applicants, specialist technology companies, de-SPAC transactions, large offerings delayed from 2023 and prominent Chinese businesses that are being encouraged by the mainland regulator to list in Hong Kong will drive the IPO market in the second half of 2024, Deloitte said.

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