Hong Kong’s IPO market is expected to raise HKD130 billion in 2017, with the emergence of ‘new economy’ IPOs and the anticipated new initiatives around listing reforms likely to boost proceeds to over HKD200 billion in 2018, finds KPMG.
While the number of IPOs in Hong Kong is forecasted to hit a record high of 160 in 2017, total proceeds are expected to decline to HKD130 billion – the lowest amount since 2012 (HKD90 billion) – due to the lack of sizeable deals. As a result, Hong Kong will be unable to retain its top spot in 2017, after ranking as the largest IPO market worldwide in 2016.
Maggie Lee, Head of Capital Markets Development Group, Hong Kong, KPMG China, says: “We are starting to see a shift in the major contributors to the IPO market from traditional financial services companies to ‘new economy’ companies related to internet and technology businesses driving new listings in the market.”
These ‘new economy’ companies focus on technology and internet-related businesses, including e-sports, online automobile financing, online insurance and e-books. Compared to 2016 where there was a lack of large IPOs from companies in ‘new economy’ sectors, four out of the top 10 largest IPOs in Hong Kong in 2017 were companies in these sectors, reflecting a market transformation led by technology companies. Furthermore, the new economy IPOs were heavily oversubscribed, indicating strong investor appetite for these companies.
Lee adds: “The ongoing discussion of listing reform, which may result in changes to the listing rules to attract ‘new economy’ companies, innovation and technology companies, as well as those with non-standard governance structures to list in Hong Kong, will increase the attractiveness of Hong Kong as a IPO destination.”Meanwhile, the A-share market in Mainland China continues to be active, with the IPO approval rate accelerating. KPMG forecasts that the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE) will raise a combined RMB235 billion from 440 IPOs in 2017, compared to RMB150 billion from 227 listings in 2016.
Louis Lau, Partner, Capital Markets Advisory Group, KPMG China, says: “Direct financing and multi-tiered capital markets is becoming increasingly important to help companies deleverage and reduce financing costs. Considering the crucial role of IPOs in direct financing, regulators will continue to promote IPO normalisation by speeding up the approval process while maintaining the quality of listing candidates.”
The SSE and SZSE are expected to remain among the top-ranked IPO destinations in 2018 in terms of proceeds. Small to medium-sized companies from the industrials and TMT sectors are expected to be the main focus next year, while listings from the healthcare and life sciences sectors will be new drivers of growth.
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