Hong Kong's IPO proceeds plunge to 2-decade low, pushing city down the global rankings

Funds raised from new share listings in Hong Kong dropped to a two-decade low in the first half of the year, pushing the city down several rungs to 13th place in a global ranking of initial public offering (IPO) markets.

Mainland China's stock exchanges, the stars of the global IPO market a year ago, fared even worse, plummeting down the league table compiled by the London Stock Exchange Group (LSEG).

A total of 27 companies raised US$1.5 billion via IPOs on the main board of the Hong Kong stock exchange in the first six months of 2024, according to the LSEG data released on Friday.

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The proceeds are 35 per cent lower than 2023's first-half total and the lowest since the US$802 million raised in the first half of 2003 when the severe acute respiratory syndrome (Sars) virus derailed the city's markets. However, the funds raised in the second quarter were 40 per cent higher than in the first three months, suggesting things may be improving.

Global IPO proceeds declined 20 per cent to US$49 billion while the number of companies floating their stock dropped 18 per cent to 539, compared to the first half of last year. High interest rates and economic uncertainty depressed IPO fundraising, according to a report by KPMG earlier this month.

Hong Kong fell four positions in the LSEG's league table from this time last year, when it ranked ninth globally before ending the year in eighth position.

"Lacklustre market sentiment in Hong Kong is one of the main reasons the IPO market has slowed down in the city," said Louis Wong, executive director of Phillip Capital Management (Hong Kong).

The New York Stock Exchange has come out on top so far this year, with 21 deals raising US$10.9 billion. The Nasdaq took second spot with 50 listings raising US$7 billion while the National Stock Exchange of India came in third with 102 listings raising US$4.3 billion ahead of the Bombay Stock Exchange in fourth with 70 listings raising US3.47 billion.

Shanghai's stock exchange ranked 15th with nine IPOs raising US$1.3 billion while the Shanghai Star Market, which topped the table this time last year, fell to 20th spot with just six new listings raising US$701 million.

Shenzhen's ChiNext plunged all the way from second to 16th with 15 new listings raising US$1.1 billion in the first half, while Shenzhen Stock Exchange fell to 26th place, with three IPOs raising US$323 million.

China's stock market regulator recently took steps to boost sentiment. The China Securities Regulatory Commission (CSRC) announced a slew of measures to tighten the quality of companies listing on the mainland, while also supporting Chinese firms wanting to list in Hong Kong.

The watchdog's vice-chairman, Fang Xinghai, said at a recent forum in Shanghai that it was working to further expedite approvals for offshore IPOs.

Jacky Lai, EY's Hong Kong assurance partner, said mainland Chinese companies will continue to dominate the Hong Kong IPO landscape as many firms "reroute" to Hong Kong for its favourable regulatory environment.

"For Chinese mainland companies, the processing time for getting listed in Hong Kong is shorter and of higher certainty," said Lai.

IPO activity in mainland China's domestic markets will remain tight in the short term, while there is likely to be a large increase in the number of Hong Kong IPOs in the third quarter thanks to supportive government policies, according to EY.

Jan Metzger, Citigroup's Asia head of investment banking, was equally sanguine.

"We are seeing green shoots and are optimistic about the long-term prospects of the Hong Kong IPO market," said Metzger, adding that global investor appetite towards quality Chinese issuers remained strong.

Tea shop giant Sichuan Baicha Baidao Industrial's HK$2.58 ­billion deal in April is the biggest IPO in Hong Kong so far this year, followed by RoboSense Technology's HK$1.06 billion share sale in January, according to LSEG data.

QuantumPharm, an AI-powered pharmaceuticals researcher, raised HK$989.3 million (US$126.7 million) in its IPO earlier this month, making it the third-largest stock sale this year in Hong Kong.

The world's biggest IPO so far this year came in April when retail giant Plug Brand raised US$2.9 billion in Spain. In second place, healthcare company Galderma Group raised US$2.5 billion in Switzerland in March, while CVC Capital Partners raised US$2.4 billion on Euronext in April, snatching third place.

Healthcare companies dominated new listings in the first half, accounting for 17 per cent of proceeds. They were followed by the high-technology, industrial and retail sectors.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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