Chinese language and Hong Kong flags flutter as screens show the Cling Seng Index outdoors the Change Sq. complicated, which homes the Hong Kong Inventory Change (HKEX), on January 21, 2021 in Hong Kong, China.
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Hong Kong recorded a notable pickup in itemizing actions this 12 months, as extra Chinese language corporations turned to the town to boost capital and buyers grew optimistic after Beijing pledged to help the offshore market.
The Hong Kong inventory change 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 12 months, marking a big enhance 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 12 months to $169 million.
The variety of corporations searching for public flotations in Hong Kong began selecting up within the second half of this 12 months, 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, consultants mentioned.
IPOs alone, Hong Kong is ready to rank fourth globally by way of funds raised this 12 months, based on KPMG, trailing India and the U.S. inventory exchanges.
“There are plenty of pent-up demand for capital elevating” since 2022, when the 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 electronic 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 extra 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 12 months, particularly towards sectors which might profit from the coverage help, comparable to 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 shopper merchandise, in September clinched the town’s largest itemizing since early 2021. Its shares listed in Hong Kong have jumped over 36% from its supply value, as buyers stay hopeful of its place to learn from Beijing’s “trade-in program,” aimed toward encouraging customers and companies to improve current home equipment and tools.
There have been 90 IPO functions pending itemizing or beneath processing as of Nov. 29 based on the change’s web site.
Whereas the town might even see a extra energetic IPO pipeline in 2025, it’s prone to be a “gradual restoration” quite than a “V-shaped” one, mentioned John Lee, vice chairman and co-head of Asia nation protection at UBS international banking Asia.
To date this 12 months, mainland buyers have purchased $96.4 billion value of Hong Kong shares, surpassing final 12 months’s whole of $42 billion and heading in the direction of the largest 12 months since a $87 billion shopping for spree in 2020, based on information from Goldman Sachs.
“There’s 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 properly. Chinese language autonomous driving agency Horizon Robotics and bottled water maker China Sources Beverage —the 2 largest IPO offers within the metropolis this 12 months — noticed their shares decline by 12% and 11%, respectively, as of Wednesday from supply value ranges.
Traders must see “concrete proof of stimulus coverage effectiveness”, Shanghai Chongyang’s Wang mentioned. He expects some enchancment in sentiment early into the second quarter subsequent 12 months when the general public corporations begin releasing earnings.
The benchmark Cling Seng Index is heading for its first annual achieve after 4 straight years of declines, surging over 16% to this point this 12 months.
Cling Seng Index
That mentioned, the rally, fueled by Beijing’s huge stimulus package deal in late September has misplaced a few of its momentum.
Wanting 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.
