Hong Kong’s IPO market is still in a slump despite an expected rebound

Hong Kong’s preliminary public itemizing market stays in a hunch, at the same time as analysts predicted a market rebound within the second half of the 12 months.

“The Hong Kong market has not recovered as a lot as we want,” Irene Chu, accomplice at KPMG China, informed CNBC.

Within the first three quarters of the 12 months, the Hong Kong IPO market concluded 44 listings, and raised 24.6 billion Hong Kong {dollars} ($3.14 billion), in line with KPMG. It represented a drop of 65% in deal depend and 15% in proceeds respectively in comparison with the identical interval final 12 months, the agency mentioned.

Hong Kong’s inventory market was among the many worst performing final 12 months, shedding 15% in 2022 for its third-straight 12 months of declines. In October, the Hold Seng Index and Hold Seng Tech Index fell to their lowest ranges since November 2022.

“The Hong Kong market is already at [a] very low level [compared to] the great outdated days in 2020 or earlier than that. So the overall sentiment has not but recovered. We can’t anticipate the IPO market to rebound shortly or be comparable with the great outdated days,” mentioned Ringo Choi, Asia-Pacific IPO chief at EY.

A June report by EY and a mid-year overview launched by KPMG China predicted the Hong Kong IPO market may rebound within the second half of 2023.

On Oct. 27, the market debut of J&T Categorical, a Tencent-backed Indonesian logistics service supplier, put up a lackluster efficiency. Shares opened flat and subsequently ended 1.33% decrease.

J&T, the second largest itemizing in Hong Kong this 12 months, had initially anticipated to lift a minimum of $1 billion within the itemizing however reduce the goal by half on the again of weak investor sentiment, in line with Reuters.

“The Hong Kong inventory market remained weak in Q3 2023, as did inventory valuations, due to macroeconomic developments, particularly round U.S. rate of interest hikes. Many IPO candidates proceed to wait-and-see for a turnaround in market valuations whereas getting ready and planning their choices,” mentioned Deloitte in a September report.

Hong Kong’s largest IPO this 12 months, Chinese language liquor maker ZJLD Group, plummeted 18% in its buying and selling debut on April 27.

The 2 largest IPOs within the Asian monetary hub final 12 months additionally slumped of their itemizing debuts. Chinese language electrical automobile maker Zhejiang Leapmotor dived 34%, whereas property companies supplier Onewo fell nearly 7%.

“5 of the final 9 giant HKEx IPOs had flat debuts. On the final shut costs, all the massive HKEx IPOs since 2022 are buying and selling under the IPO costs,” mentioned Arun George, co-founder and analyst at World Fairness Analysis in a Oct. 26 report printed on Smartkarma, an funding analysis community.

Hong Kong is a particular administrative area of China, which has confronted a disappointing post-Covid financial restoration. In October, the Worldwide Financial Fund lowered its development forecast for China to five% this 12 months and 4.2% in 2024.

The inventory exchanges of Shanghai and Shenzhen raised $28.7 billion and $19.8 billion in funds respectively from January to Oct. 9, dropping 42% and 23% in comparison with the primary three quarters of final 12 months, KPMG reported.

However analysts say the worldwide economic system outdoors of China is struggling to recuperate. “It is not simply China. The restoration of the worldwide economic system can be fairly difficult. General financial restoration takes a little bit of time to essentially choose up,” mentioned Chu of KPMG China.

Within the first three quarters of this 12 months, there have been 968 IPOs globally, which raised $101.2 billion in capital —a 5% and 32% lower year-over-year respectively, mentioned EY.

In a bid to bolster the market, the Hong Kong Inventory Change in September proposed measures to reinforce the enchantment for small- and medium-sized enterprises with high-growth potential to checklist.

In August, the federal government introduced a process pressure to “improve” inventory market liquidity in an effort to bolster the event of its capital market.

“The dynamic initiatives, coupled with HKEX’s steady enchancment of its itemizing regime, are essential to strengthening Hong Kong’s various and multi-layered capital markets, a key to sustaining the competitiveness of Hong Kong as a premier worldwide monetary centre,” mentioned KPMG.