Hong Kong data first rise in new listings since 2020 as Beijing coverage fuels optimism

Hong Kong has seen a notable uptick in itemizing exercise this 12 months, as extra Chinese language firms turned to town to boost capital and traders grew optimistic after Beijing pledged help the offshore market.

The Hong Kong inventory alternate noticed new listings soar for the primary time after three consecutive years of decline, when it comes to transaction worth, based on knowledge compiled by Dealogic. This included preliminary public choices and extra inventory gross sales.

Town’s bourse has raised a complete of $10.65 billion throughout 63 offers this 12 months, a big improve of over 80% from the $5.89 billion raised throughout 67 offers in 2023 – which was the bottom since 2001, based on Dealogic.

In one other signal that companies and traders are regaining confidence within the Hong Kong market, the common transaction measurement nearly doubled from the earlier 12 months, reaching $169 million.

The variety of firms searching for to checklist on the Hong Kong inventory market started to extend within the second half of this 12 months, because the China’s securities regulator in April is dedicated to supporting the Hong Kong market and facilitating extra IPOs of main mainland firms.

Beijing’s accelerated restoration plan has additional boosted company curiosity in elevating capital within the offshore metropolis and attracted some international capital funds, specialists stated.

Taking a look at IPOs alone, Hong Kong is predicted to rank fourth on this planet when it comes to funds raised this 12 months, according to KPMGbehind India and the American inventory markets.

“There may be numerous pent-up demand for capital elevating” since 2022, when town’s financial system was trying to get better from a pandemic-induced slowdown, stated Andy Maynard, managing director and head of equities at China Renaissance in an electronic mail.

Regardless of some “indicators of life”, Maynard warned that solely when “we see continued enchancment within the native financial system and geopolitical tensions proceed to ease” can we count on an extra resumption of IPO actions in Hong Kong.

For years, itemizing exercise within the Asian monetary middle had diminished as geopolitical tensions and rising rates of interest globally have dampened investor urge for food for operations within the Hong Kong and Chinese language capital markets.

China’s financial slowdown and the persistent disaster in the actual property market have additionally raised issues amongst issuers and traders concerning firm valuations.

Investor confidence has improved this 12 months, particularly towards sectors that will profit from coverage help, equivalent to consumer-related firms, stated Qing Wang, president and chief strategist of Shanghai Chongyang Funding Administration.

Midea Group, which sells air conditioners, washing machines, elevators and different client merchandise, received town’s high prize in September. the biggest list because the begin of 2021. Its Hong Kong-listed shares have surged greater than 36% from its providing worth, with traders remaining hopeful that its place may benefit from Beijing’s “exchange program” geared toward encouraging shoppers and companies to improve present home equipment and tools.

There was 90 IPO applications awaiting listing or in course of as of November 29 based on the alternate web site.

Though town may see a extra energetic IPO pipeline in 2025, it’s going to seemingly be a “gradual restoration” quite than a “V-shaped” restoration, stated John Lee, vice-president. President and Co-Head of Asian Nation Protection at UBS International. Asian financial institution.

Thus far this 12 months, mainland traders have purchased $96.4 billion price of Hong Kong shares, surpassing final 12 months’s whole of $42 billion and heading for the most important 12 months in a $87 billion shopping for spree in 2020, based on Goldman Sachs knowledge.

“There may be additionally a return of long-term international securities [funds] in China [and] Hong Kong shares, though the tempo is gradual,” stated Perris Lee, head of APAC fairness capital markets at Ion Analytics.

Not all newly listed shares have traded nicely. Chinese language autonomous driving firm Horizon Robotics and bottled water maker China Sources Beverage — the 2 largest IPOs within the metropolis this 12 months — noticed their shares fall 12% and 11%, respectively, on Wednesday in comparison with at supply worth ranges.

Buyers must see “concrete proof of the effectiveness of the stimulus coverage,” stated Shanghai Chongyang’s Wang. He expects some enchancment in confidence early within the second quarter of subsequent 12 months, when public firms start reporting outcomes.

The benchmark Grasp Seng Index is heading for its first annual acquire after 4 straight years of decline, rising greater than 16% thus far this 12 months.

That stated, the restoration, fueled by Beijing’s huge restoration plan on the finish of September, has misplaced a few of its momentum.

Trying forward, China Renaissance’s Maynard stated that whereas the Hong Kong inventory market could have turned a nook, he sees “no prospect of a Santa rally.” The market remained “trapped and restricted” whereas the restoration bulletins made by Beijing since September have been disappointing.