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Hong Kong stock IPO strives to maintain the top three, and the amount of funds raised this year is cautiously optimistic

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Author Chen Jiayi, this article only represents personal views

In the past year, due to factors such as the Russian-Ukraine war detonating the European energy and inflation crisis, the US Federal Reserve’s heavy-handed interest rate hikes, and the repeated outbreaks of the new crown epidemic in China, the global capital market has been turbulent. In response to the correction in the stock market, corporate valuations have been severely damaged, and initial public offering (IPO) fundraising activities have also slowed significantly.

According to statistics from accounting firm Ernst & Young, there were 1,333 IPOs worldwide last year, a year-on-year decrease of 45%; the amount of funds raised was US$179.5 billion (1.24 trillion yuan), a drop of 61%. According to data provided by KPMG, the amount of funds raised in the U.S. market has dropped by more than 90%, and Nasdaq and New York Stock Exchange have retreated to 9th and 11th in the global fundraising list for the first time in ten years; in contrast, Shanghai Stock Exchange and Shenzhen The stock exchange raised US$52.7 billion and US$28.8 billion respectively, taking the first and second place respectively, demonstrating the strong resilience of China’s IPO market.

The IPO market of Hong Kong stocks was bitter before sweet. Its performance in the first half of the year was lackluster. Only 27 new stocks were listed, raising a total of 19.73 billion Hong Kong dollars (17.8 billion yuan). Starting from July, Tianqi Lithium (9696.HK; 002466.SZ) raised HK$13.5 billion, and China CDFG (1880.HK), which went public in August, raised HK$18.4 billion, making it the largest company in the year. The “King of Fundraising”, together with the listing of China Innovation Aviation (3931.HK), which raised 10.1 billion Hong Kong dollars in new shares, helped the Hong Kong IPO market to catch up. As the Hang Seng Index bottomed out in October, the pace of new stock listings accelerated. In the second half of the year, a total of 63 new stocks were listed, raising a total of HK$84.84 billion, a year-on-year increase of 3.3 times.

For the whole year, the Hong Kong stock market has a total of 21 new listings in the last month, and a total of 90 new listings have been recorded. With a total fundraising amount of 104.57 billion Hong Kong dollars, it surpassed South Korea and ranked third in the global fundraising list. Although trying to maintain the top three positions, the number of new listings is still 8.9% lower than in 2021, and the amount of funds raised is even lower by nearly 68%. Moreover, as many as 35 new listings broke on the first day of listing. In fact, it can only be said to be a tragic victory. The type of IPO industry has also changed, from being dominated by large-scale technology stocks and biotechnology stocks in the past few years to being dominated by industrial and new materials, retail, consumer goods and services.

It is worth noting that the return of Chinese concept stocks continues. Last year, a total of 11 Chinese concept stocks listed in the United States were listed on the Hong Kong stock market. , OneConnect (OCFT.US; 6638.HK), Tencent Music (TME.US; 1698.HK), BOSS Zhipin (BZ.US; 2076.HK) and Kingsoft Cloud (KC.US; 3896.HK) They were all listed in the form of introductions and did not raise funds in the market. The fundraising scale of the remaining five companies was relatively small, which did not help much in promoting the amount of funds raised by Hong Kong stocks.

Accounting giants are optimistic about the same

Entering 2023, the market generally expects the Federal Reserve to slow down the pace of interest rate hikes, coupled with China’s comprehensive customs clearance, which is conducive to the recovery of the global economy. If global inflation is gradually controlled in the second half of the year, the pace of interest rate hikes in various countries is expected to slow down, which will help repair the market and corporate valuations, and promote the recovery of the global IPO market.

Deloitte Capital Market Services predicts that with the support of multiple favorable factors, Hong Kong stocks will usher in 110 new share financings this year, raising approximately HK$230 billion. KPMG also expects a steady recovery in market sentiment, attracting companies that have delayed listing earlier to restart their plans. Since more than 120 companies have submitted applications, it is estimated that at least 90 new shares will be listed throughout the year, raising a total of HK$180 billion: plus Price Dow and Ernst & Young also predict that the annual fundraising amount will reach HK$200 billion, reflecting that the Big Four accounting firms are optimistic that the IPO financing amount of Hong Kong stocks will increase significantly this year.

In addition, a series of new measures to be implemented by the Hong Kong Stock Exchange are also of positive significance to the IPO market. The China Securities Regulatory Commission announced in September last year that it will promote the inclusion of foreign companies mainly listed in Hong Kong in the southbound trading of the “Shanghai-Shenzhen-Hong Kong Stock Connect”, and will study and allow the addition of RMB stock trading counters in the Hong Kong Stock Connect. Therefore, the Hong Kong Stock Exchange cooperated with the launch of the “dual-counter market maker system” for dual-currency stocks. It is expected that the registration process will begin in the first half of this year, which may help attract foreign companies and dual-counter securities to Hong Kong stocks for listing.

As for the FINI (Fast Interface for New Issuance) platform launched in July last year, it will fully simplify and digitize the IPO procedures. T+5″ has been greatly shortened, reducing investors’ capital costs and improving the situation of freezing a large amount of funds during the subscription period for new shares.

The Hong Kong Stock Exchange also plans to add chapter 18C to the “Listing Rules” to lower the listing threshold for five “specialized technology industries” including new generation information technology, advanced hardware, advanced materials, new energy and energy conservation and environmental protection, new food and agricultural technology. The consultation period expired in mid-December last year, and it is expected to be implemented in the first quarter, providing impetus for the annual IPO fundraising.

Chinese concept stocks may slow down their return to Hong Kong

Looking forward to this year, the market expects at least 10 companies with a fundraising amount of more than US$1 billion to prepare for listing on the Hong Kong stock market, including Ant Group under Alibaba (BABA.US; 9988.HK) and Amer under Anta Sports (2020.HK). Sports, and Hong Kong insurer FWD Group, etc.

Wen Jie, director of KGI’s Asia investment strategy department, said that as market conditions improve, large companies are attracted to launch IPOs, and they are cautiously optimistic about the Hong Kong IPO market this year. However, he also pointed out that in the past two or three years, the controversy over the review of accounting drafts that plagued US-listed Chinese concept stocks, as the US Public Company Accounting Oversight Board (PCAOB) sent personnel to Hong Kong to conduct on-site inspections, and announced on December 15 that for the first time it could fully The review of the accounting papers of China concept stocks has alleviated the risk of more than 200 Chinese companies being forced to delist, which may mean that the urgency of China concept stocks returning to Hong Kong stocks has been reduced.

Wen Jie pointed out that the e-commerce company Pinduoduo (PDD.US) and the intelligent logistics ecological platform Manbang Group (YMM.US) have shelved the discussion of returning to the Hong Kong stock market, so he estimated that the speed of Chinese concept stocks listing on the Hong Kong Stock Exchange may be will slow down, reducing the number of new listings in the Hong Kong stock market this year.

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