Hong Kong’s position as a leading global IPO hub continues, fundraising hits HKD 19.9 billion in 2019 Q1, KPMG analysis
Hong Kong’s position as a leading global IPO hub...
Plans to attract overseas companies and new economy firms from tech and biotech sectors will help diversify HK’s market, as new tech board set to spur A-share activity
The Hong Kong IPO market saw a steady performance in 2019 Q1, underpinned by the continuation of new economy companies going public. Meanwhile, the introduction of the Science and Technology Innovation Board (“new tech board”) in Shanghai is set to spur A-share activity, KPMG’s analysis finds.
Based on a combination of data as of 15 March 2019 and KPMG estimates, 36 companies raised a total of HKD 19.9 billion in 2019 Q1 in Hong Kong. In the Main Board, the number of IPOs was 31 with proceeds at HKD 19.5 billion. Seven new economy companies – in technology, media and telecoms (TMT) (4), healthcare/life sciences (2) and education (1) – contributed over 42 percent of the total funds raised.
For the A-share market, listing rules and regulations of the new tech board are already in place with listing applications coming through gradually. Listings are likely to be completed in summer or autumn.
“The A-share and Hong Kong markets’ continued complementary growth is crucial as the new tech board helps develop up-and-coming companies,” says Paul Lau, Partner and Head of Capital Markets, KPMG China.
In 2019 Q1, HKEX stated its vision of being the global markets leader in Asia, by further increasing its international relevance both into and out of China and the rest of Asia.
“Hong Kong is evolving to become more inclusive to attract listing applicants from overseas and non-traditional industries. We are seeing an increasing level of interest from established international firms listing their shares or looking into spin-offs in Hong Kong. This will further strengthen the bourse’s position as an international financial centre,” Lau adds.
Five of the top 10 largest IPOs in Hong Kong recorded in the quarter were new economy companies, including two pre-revenue biotech firms, KPMG’s analysis finds. This reflects the extended listing momentum of the sector, as five pre-revenue biotech companies went public in 2018 after the new listing regime launched in April last year. The other new economy firms among the top 10 in 2019 Q1 included two from TMT and one from education.
The emergence of IPOs for new economy companies diversified the business sectors in terms of proceeds contributions. While infrastructure/real estate companies dominated in terms of funds raised, their proportion decreased to 19 percent from 45 percent a year ago. TMT and healthcare/life sciences both accounted for 18 percent in 2019 Q1, compared to less than six percent each for the same period last year.
“The pipeline continues to be strong with a number of new economy companies from the pharmaceutical sector and businesses in traditional sectors leveraging technological breakthroughs. We expect to see an acceleration of momentum for IPO activities the rest of the year,” says Irene Chu, Partner, Head of New Economy and Life Sciences, Hong Kong, KPMG China.
As of 15 March 2019, there were 148 active IPO applicants, an increase from 81 at the end of March 2018, KPMG’s analysis finds.
In 2019 Q1, total fundraising between the Shanghai Stock Exchange and Shenzhen Stock Exchange decreased 31 percent year on year to RMB 27.4 billion due to global economic uncertainties and slowing approval rates.
However, the new tech board will play a crucial part of China’s strategic plan to push for innovation-driven growth and enhance the capital market.
“The new tech board has generated significant market interest, and priority will be given to listing applicants with high market recognition and breakthroughs in core technologies. With its focus on quality, we believe in its potential to serve as a pillar for the development of new economy companies for years to come,” says Louis Lau, Partner, Capital Markets Advisory Group, KPMG China.
About KPMG China
KPMG member firms and its affiliates operating in Mainland China, Hong Kong and Macau are collectively referred to as “KPMG China”.
KPMG China is based in 21 offices across 19 cities with around 12,000 partners and staff in Beijing, Changsha, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Hangzhou, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Wuhan, Xiamen, Xi’an, Hong Kong SAR and Macau SAR. Working collaboratively across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.
KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 153 countries and territories and have 207,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong firm can trace its origins to 1945. This early commitment to this market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in KPMG’s appointment for multi-disciplinary services (including audit, tax and advisory) by some of China’s most prestigious companies.
© 2022 KPMG Huazhen LLP, a People's Republic of China partnership, KPMG Advisory (China) Limited, a limited liability company in Mainland China, KPMG, a Macau (SAR) partnership, and KPMG, a Hong Kong (SAR) partnership, are member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation.
For more detail about the structure of the KPMG global organisation please visit https://home.kpmg/governance.