The Chinese and Hong Kong flags fly as screens show the Hang Seng index outside the Exchange Square complex, which houses the Hong Kong Stock Exchange (HKEX), on January 21, 2021 in Hong Kong, China.
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Hong Kong has recorded a notable rebound in listing activity this year, with more Chinese companies turning to the city to raise capital and investor optimism growing after Beijing pledged to support the offshore market.
The Hong Kong Stock Exchange saw a jump in new listings for the first time after three consecutive years of decline, in terms of deal values, according to data compiled by Dealogic. This included initial public offerings and subsequent additional stock sales.
The city exchange raised a total of $10.65 billion across 63 deals this year, representing a significant increase of more than 80% compared to the $5.89 billion raised across 67 deals in 2023 — the lowest since 2001, according to Dealogic.
As further evidence that companies and investors are regaining confidence in the Hong Kong market, the average deal size nearly doubled from the previous year to $169 million.
The number of companies seeking to go public in Hong Kong began to increase in the second half of this year China Securities Commission in April It pledged to support the Hong Kong market and facilitate more initial public offerings from leading companies on the mainland.
Beijing's intensified stimulus package has boosted companies' interest in raising capital in the overseas city and attracted some foreign capital funds, experts said.
Looking at IPOs alone, Hong Kong is set to rank fourth globally in terms of funds raised this year, According to KPMGlagging behind the Indian and US stock exchanges.
“There is a lot of pent-up demand to raise capital” since 2022, when the city's economy sought to shake off a pandemic-induced slowdown, Andy Maynard, managing director and head of equities at China Renaissance, said in an email.
Despite some “signs of life,” Maynard warned that only when “we see continued improvement in the internal economy and geopolitical tensions continue to ease” can one expect a further rebound in IPO activities in Hong Kong.
“Signs of life”
For years, the activity has been listed in the Asian financial hub It has declined due to geopolitical tensions High interest rates globally have weakened investors' willingness to buy into capital market deals in Hong Kong and China.
The economic downturn in China and the stubborn crisis in the housing market have also raised concerns among exporters and investors when it comes to company valuations.
Qing Wang, chairman and chief strategist at Shanghai Zhongyang Investment Management, said investor sentiment has improved this year, especially towards sectors that will benefit from policy support, such as consumption-related companies.
Midea Group, which sells air conditioners, washing machines, elevators and other consumer products, in September won the city's top spot. Largest list since early 2021. Its Hong Kong-listed shares have jumped more than 36% from the offering price, as investors remain optimistic about its position to benefit from “Beijing Trade Program” It aims to encourage consumers and businesses to upgrade existing appliances and equipment.
There was 90 IPO applications awaiting listing Or in processing as of November 29 according to the exchange's website.
While the city may see more IPOs in 2025, it will likely be a “gradual recovery” rather than a “V-shaped” one, said John Lee, vice chairman and co-head of Asia coverage at UBS Global. Asia Banking.
So far this year, mainland investors have bought $96.4 billion worth of Hong Kong stocks, surpassing last year's total of $42 billion and on track for the biggest year since an $87 billion buying spree in 2020, according to data from Goldman Sachs.
“There is also a return of only long-term foreign (funds) into Chinese (and) Hong Kong equities, although the pace is gradual,” said Peris Lee, head of Asia-Pacific equity capital at Ion Analytics.
“Not a Santa gathering.”
Not all new listed stocks traded well. Chinese self-driving company Horizon Robotics and bottled water maker China Resources Beverage — the two largest IPO deals in the city this year — saw their shares fall 12% and 11%, respectively, as of Wednesday from their bid price levels.
Investors need to see “concrete evidence of the effectiveness of the stimulus policy,” said Wang from Shanghai Zhongyang. Some improvement in sentiment is expected early in the second quarter of next year when public companies begin announcing earnings.
The benchmark Hang Seng Index is on track for its first annual gain after four straight years of declines, rising more than 16% so far this year.
Hang Seng Index
However, the rally, fueled by Beijing's massive stimulus package in late September, has lost some of its momentum.
Looking ahead, China Renaissance's Maynard said that while Hong Kong's stock market may have turned a corner, he saw “no possibility of a Santa rally.” The market remained “trapped and range-bound” as Beijing's stimulus announcements since September have been disappointing.
