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.
Many companies in these areas benefit more from listing on a mainland exchange than doing so in Hong Kong. Their key investors are most likely to be mainland Chinese and include government interests.
That said, Hong Kong is likely to remain attractive as an IPO destination for Chinese companies in non-strategic sectors. To that end, in mid-September, Chinese appliance maker Midea priced its forthcoming IPO at the top of the anticipated range given strong investor interest. The world’s largest home applicance manufacturer is expected to raise about HK$27 billion (US$3.5 after setting the IPO price at the top of its range of HK$52 to HK$54.80.
The Midea deal will be Hong Kong’s largest new listing in more than three years. It is expected to give the market a needed shot in the arm and help pave the way for a steady pipeline of new deals.
"Amid the current poor market sentiment in Hong Kong, a successful jumbo IPO like the Midea offering can help improve market sentiment," Tom Chan Pak-lam, the permanent honorary president of the Institute of Securities Dealers, told The South China Morning Post. "It is likely to bring in more mega deals in the Hong Kong markets in the future."