Global accounting firm Ernst & Young says it remains upbeat about the Hong Kong IPO market for the rest of the year despite a sluggish first half, buoyed by the growing number of Chinese mainland companies gearing up for listings in the city.
IPO fundraising in the international finance hub plunged 32 percent year-on-year in the first half of 2024, with 28 companies raising HK$12.1 billion ($1.5 billion) of new capital as of June 12, according to EY’s latest report.
The IPO fundraising pool is expected to expand. “There has been increasing pre-IPO work by mainland companies preparing for Hong Kong listing since March and April. The number of filings is expected to rise significantly in the third quarter”
The number of deals fell 3 percent in the same period as high interest rates and slowing global economic growth took a toll on the market, leading companies to exercise greater caution in filing for IPOs and offering fewer shares.
READ MORE: Experts upbeat over HK’s IPO market, despite lackluster start
Jacky Lai, EY Hong Kong capital market service spokesman, said companies that newly listed on the Hong Kong Stock Exchange in the first half of the year were primarily small and medium-sized enterprises, with only one company raising over HK$2 billion.
But the report added that the Hong Kong IPO market had shown signs of recovery in the second quarter, with a stock market rebound and improvements in liquidity and other market indicators boosting investor sentiment. That resulted in a 33 percent and 52 percent quarter-on-quarter surge in the number of IPO deals and proceeds, respectively.
The IPO fundraising pool is expected to expand. “There has been increasing pre-IPO work by mainland companies preparing for Hong Kong listing since March and April. The number of filings is expected to rise significantly in the third quarter,” Lai said.
He also noted that the Hong Kong government and financial regulators have played crucial roles in driving the growth of the local IPO market, including improving trading efficiency and stock market liquidity, as well as attracting companies from the Middle East and Southeast Asia to list in Hong Kong.
In the first half of the year, Hong Kong stock market benchmark, the Hang Seng Index, gained 6.6 percent. The Shanghai Composite Index climbed 1.8 percent, while the Shenzhen Component Index fell 2.8 percent.
Amid multiple headwinds, Hong Kong ranked 10th among major global stock exchanges in terms of initial public offering proceeds in the first six months of the year.
READ MORE: HK financial analysts expect IPO market rebound next year
The top three bourses over that period were the New York Stock Exchange, which led the pack with a total of $10.8 billion in fundraising, followed by Nasdaq, and India’s Bombay Stock Exchange.
Global IPO proceeds fell 17 percent year-on-year in the first half of the year to $51.7 billion.
On Thursday, mainland AI-driven drug research firm QuantumPharm made its debut on the Hong Kong Stock Exchange, becoming the first company to list under the city’s new Chapter 18C rules, which were designed for pre-revenue specialist technology firms. The listing, which raised HK$990 million, marks the third-largest IPO in Hong Kong this year.
Contact the writer at tianyuanzhang@chinadailyhk.com
