Statistics

Hong Kong Leads As IPO Hub, Beating New York, Shanghai

Tom Burroughes Group Editor 4 January 2017

Hong Kong Leads As IPO Hub, Beating New York, Shanghai

Uncertainties in some markets - such as around Brexit and the US elections - helped create a position where Hong Kong beat centres such as New York for IPO fundraising totals.

New liquidity event data from PricewaterhouseCoopers, the professional services firm, shows that Hong Kong came out top in 2016 for the amount of funds raised in share floats, beating Shanghai and New York in second and third place respectively, as geopolitical uncertainties affected money-raisings. The firm predicts total fundraising in 2017 to reach HK$220 billion ($28.4 billion).

Total fundraising in Hong Kong fell 26 per cent year-on-year to $194.8 billion.

PwC said the slow global economic recovery, Brexit, the US presidential election and rising interest rates created a difficult fundraising environment in certain jurisdictions; in Hong Kong’s case, organisations are still seeing it as their “first choice of fundraising platform in Asia and even worldwide”.

IPOs, along with sales of companies, share option usage and other "liquidity events", are tracked by wealth managers seeking new clients. This news service recently interviewed Wealthmonitor, a firm tracking such data, to explore the value of such statistics for the wealth industry.

There were a total of 126 new listings in 2016, of which 81 were Main Board listings. These mostly comprised industrial companies, followed by retail, consumer goods and services and financial services companies. Some 45 were global emerging market (GEM) listings - the highest number of GEM IPOs in Hong Kong since 2002.

“It is expected that the momentum of GEM IPOs will extend into 2017. In addition, PwC has noted that more and more small- and medium-sized enterprises were listed in Hong Kong in 2016, and it is expected that this trend will continue into 2017 as well,” it said. 

Last year, IPOs of financial service companies continued to lead the race, making up 69 per cent of total funds raised on the Main Board. There were eight new listings of financial services companies with a fundraising scale of over HK$5 billion. “This reflects the fact that many mainland banks and financial institutions continued to actively pursue listing in Hong Kong in order to raise capital and meet future development needs. Financial services are expected to continue to lead through the whole of 2017, with the chance of seeing four to five mega-IPOs each raising over HK$10 billion,” it said. 

“Uncertainty in the global economy in 2016 dragged down overall fundraising. This, combined with volatility in mainland China stock markets earlier this year and a slowdown in China’s economic growth, prompted investors and companies planning to list in Hong Kong to adopt a wait-and-see attitude, intensifying the risk-averse sentiment in the market and impacting the investment appetite for and pricing of new listings,” said Eddie Wong, partner of capital markets services, PwC Hong Kong.

“All of these factors have led to a drop in the amount of funds raised by IPOs in Hong Kong from the previous year. However, there remains demand from mainland companies for listings in Hong Kong. Hong Kong’s IPO market is still more active than other exchanges, enabling it to maintain its global leading position,” Wong added.

PwC predicts there will be 130 IPOs in Hong Kong in 2017, given that there are already 126 applications from companies intending to list on the Hong Kong Main Board and GEM. This would be a sharp increase of over 40 per cent from the corresponding period in 2015.

“We expect that global markets will remain volatile in 2017, with major factors including the economic policies and pace of interest rate hikes of the new US government, whether the Brexit plan will be initiated, post-referendum political trends in Italy, and economic recovery and quantitative easing policy in European countries,” said Benson Wong, entrepreneur group leader, PwC Hong Kong.

“However, as variables in the macroeconomic environment are resolved, and the risk-off sentiment among global investors cools down, the market investment climate is expected to improve gradually. Market consensus shows that China’s economy will maintain a steady growth, while government measures adopted in mainland China to promote development of the services industry and urbanisation will bring plenty of business opportunities to enterprises in mainland China and Hong Kong, boosting fundraising demand. Hong Kong’s capital markets would be the best platform for enterprise listings and further fundraising. We anticipate more buoyancy in Hong Kong IPO listings in the second half of 2017, especially in Q4, traditionally the peak IPO season,” Wong said.

Looking at mainland markets, due to global instability and the suspension and resumption of IPOs in 2015, the A-share market was still in recovery in the first half of 2016, resulting in a moderate increase in terms of IPO volume. Overall market performance was stable in the second half of 2016. This accelerated IPO approvals and the momentum is expected to continue. PwC expects to see 320-to-350 new listings in the A-share markets, and total funds raised at RMB220 billion ($31.6 billion) to RMB250 billion for full year 2017, it added.

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