Chinese language and Hong Kong flags flutter as screens show the Cling Seng Index exterior the Trade Sq. complicated, which homes the Hong Kong Inventory Trade (HKEX), on January 21, 2021 in Hong Kong, China.
China Information Service | China Information Service | Getty Photographs
Hong Kong recorded a notable pickup in itemizing actions this yr, as extra Chinese language corporations turned to town to boost capital and traders 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, when it comes to deal values, in accordance with 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 yr, marking a major improve of greater than 80% in comparison with the $5.89 billion raised throughout 67 in 2023 — which was the bottom since 2001, in accordance with Dealogic.
As one other signal that corporations and traders are regaining confidence in Hong Kong’s market, the common deal measurement almost doubled from the earlier yr to $169 million.
The variety of companies searching for public flotations in Hong Kong began selecting up within the second half of this yr, 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, specialists mentioned.
IPOs alone, Hong Kong is about to rank fourth globally when it comes to funds raised this yr, in accordance with KPMG, trailing India and the U.S. inventory exchanges.
“There are a lot of pent-up demand for capital raising” since 2022, when 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 “signs of life,” Maynard cautioned that solely when “we see continued improvement in the onshore economy and geopolitical tensions continue to soften” can one anticipate 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 traders 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 traders when it got here to corporations valuations.
Investor sentiment has improved this yr, 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 town’s largest itemizing since early 2021. Its shares listed in Hong Kong have jumped over 36% from its provide worth, as traders stay hopeful of its place to profit from Beijing’s “trade-in program,” aimed toward encouraging shoppers and companies to improve current home equipment and gear.
There have been 90 IPO functions pending itemizing or beneath processing as of Nov. 29 in accordance with the change’s web site.
Whereas town may even see a extra energetic IPO pipeline in 2025, it’s prone to be a “gradual recovery” somewhat than a “V-shaped” one, mentioned John Lee, vice chairman and co-head of Asia nation protection at UBS world banking Asia.
To date this yr, mainland traders have purchased $96.4 billion price of Hong Kong shares, surpassing final yr’s complete of $42 billion and heading in direction of the largest yr since a $87 billion shopping for spree in 2020, in accordance with information from Goldman Sachs.
“There is also a return of foreign long-only [funds] to China [and] Hong Kong equities, though the pace 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 Assets Beverage —the 2 largest IPO offers within the metropolis this yr — noticed their shares decline by 12% and 11%, respectively, as of Wednesday from provide worth ranges.
Buyers must see “concrete evidence of stimulus policy effectiveness”, Shanghai Chongyang’s Wang mentioned. He expects some enchancment in sentiment early into the second quarter subsequent yr when the general public corporations begin releasing earnings.
The benchmark Cling Seng Index is heading for its first annual acquire after 4 straight years of declines, surging over 16% up to now this yr.
Cling Seng Index
That mentioned, the rally, fueled by Beijing’s large 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 might 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.
