Hong Kong, China IPO activity set to pick up, according to PwC

Accounting firm forecasts acceleration in capital markets activity as global monetary easing kicks in

PUBLISHED : Tuesday, 05 April, 2016, 7:23pm
UPDATED : Tuesday, 05 April, 2016, 7:25pm

Global liquidity is expected to be abundant and will continue to flow into emerging markets, ensuring strong performances by the mainland and Hong Kong initial public offering (IPO) markets, according to accounting major PwC.

The strong liquidity was supported by the anticipated move by the People’s Bank of China to lower banks’ deposit reserve ratio, and the sub-zero interest rate environment in Europe and Japan.

In a report released on Tuesday, PwC said authorities in China and Hong Kong are working towards the launch of the Shenzhen-Hong Kong Stock Connect in second half of 2016, as well as the development of multi-layered capital markets in China.

“These measures will help increase liquidity between the mainland and Hong Kong markets and have a positive influence on IPO activities,” it said in the report.

In a Credit Suisse forum on Tuesday, Charles Li Xiaojia, chief executive at Hong Kong Exchanges and Clearing, unveiled that a preparatory period of three to four months will be required by the markets both in the mainland and Hong Kong once regulators give a green light to the Shenzhen-Hong Kong Stock Connect.

The local bourse has been technically prepared for the connect scheme, Li said, adding that he has not seen any obstacle that could affect the launch of the Connect.

PwC said the focus of new listings in Hong Kong continue to be the financial services industry. In recent years Chinese financial institutions have been committed to broadening their channels for additional capital in order to improve capital adequacy and meet future development needs. This has driven them to consider Hong Kong as a fundraising destination.

Provided that the global economy does not slip into crisis and there are no unforeseen market disruptions , PwC estimates that Hong Kong could place among the top three markets globally in terms of funds raised by new share listings.

In the first quarter of this year, the amount of funds raised by IPOs in Hong Kong reached HK$27.8 billion, up 37 per cent on year. There were a total of 19 new listings in the first quarter in Hong Kong, a drop of 32 per cent year-on-year.