Are Hong Kong's capital markets recovering?

Written by Kapronasia || October 20 2024

Hong Kong’s capital markets have had a tough couple of years. The Hong Kong Stock Exchange (HKEX) closed 2023 as the worst performing exchange in the world. HKEX plunged 24%, erasing US$13 billion in market capitalization, according to Bloomberg. Unsurprisingly, IPO activity was tepid in Hong Kong last year, and remained that way up until a flurry of listings in recent months that suggested a turnaround in market sentiment.

US$7.14 billion was raised via IPOs on the main board of the Hong Kong stock exchange in the first nine months of the year, up 100% year-on-year and surpassing the total of US$5.9 billion raised in 2023, according to data compiled by London Stock Exchange Group (LSEG). Additionally, in the week to October 18, an additional US$1.3 billion was raised, making it Hong Kong's busiest week for IPOs in two years.

Among the key IPOs in Hong Kong right now: Chinese autonomous driving firm Horizon Robotics expects to raise up to US$696 million – the largest deal of the year so far – and will begin trading on October 24. For its part, China Resources Beverage raised US$650 million after pricing the offering at the top end of the price range.

"This more positive sentiment has meant there has been a pick-up in ECM activity," Sunil Dhupelia, JPMorgan's co-head of equity capital markets for Asia, told Reuters. "We feel positive about the outlook for 2025 and beyond and the amount of dialogue around who could come to market for the rest of this year and into the next is clearly picking up."

The question now is if Hong Kong’s IPO market has entered a genuine recovery period or if this is just a temporary uptick. From 2003 to 2019, it was frequently among the best performing exchanges in the world, but its fortunes have waned in tandem with economic travails on the Chinese mainland. The sustained growth in China’s consumer technology sector drove much of the Hong Kong IPO boom in the aughts and 2010s. However, since late 2020, the central government has been cracking down on Chinese consumer tech giants while favoring so-called “hard technologies” in strategic areas like semiconductors, the new-energy vehicle ecosystem, and aeronautics.

For their part, regulators in Hong Kong do seem intent on making the IPO process in the city more seamless. Indeed, the Hong Kong Exchanges and Clearing (HKEX) and the Securities and Futures Commission (SFC) have pledged to vet and debut companies in about 100 days. This would be a significant improvement over the current median time of getting approved, which is 173 business days.

The new timeline will “provide greater clarity and certainty in the application process for new listing applications," Katherine Ng, HKEX’s head of listing, said in a statement.

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