HK Exchange faces missing top 10 for IPOs
After holding top position for the past three years, fears over the mainland and Europe lead to exchange being at risk of missing the top 10
The Hong Kong stock exchange is likely to drop out of the world's top 10 destinations for initial public offerings (IPOs) this year, after holding the No1 ranking for the past three years.
The worsening global financial situation, in particular growing uncertainty about the debt crisis in the euro zone and the economic slowdown on the mainland, have already seen the exchange slump to its worst performance in attracting new listings in 10 years, Haitong International strategist Edward Huang said.
In the first eight months of this year, new listings raised just under HK$43 billion, down 77 per cent year on year from about HK$190 billion in the first eight months of last year, and at a 10-year low for Hong Kong Exchanges and Clearing (HKEx) in terms of IPO activity.
"Institutional investors favoured bonds over stocks, and low trading and investment amounts," Huang said, and this cautious behaviour was a major factor behind the slump in the IPO market.
In July, the South China Morning Post reported that many of the companies that succeeded in launching IPOs earlier this year should have been thankful mostly to their "cornerstone investors", who subscribed to between 40 per cent and 50 per cent of the offers.
More recently, the IPO fund-raising situation has turned even worse as many companies could not get enough cornerstone investors to commit to such a take-up of shares before their public floats.
"As a result many companies postponed their listing initiatives. It has become so difficult to obtain [enough] stock subscriptions," Huang said, pointing to delays to IPOs by China Everbright Bank and the People's Insurance Company (Group) of China as two recent examples.