Hong Kong races past New York to return as top IPO market for first time in four years

With listings from 71 firms raising more than US$30 billion so far this year, city is well on its way to reclaiming the crown it last held in 2011

PUBLISHED : Thursday, 03 December, 2015, 4:53pm
UPDATED : Friday, 04 December, 2015, 10:24am

Hong Kong Exchanges and Clearing is on track to beat New York Stock Exchange to return as the top initial public offering (IPO) market this year, for the first time since 2011.

In the first 11 months of the year, Hong Kong had a 15.7 per cent market share of IPO funds worldwide, with 71 companies listing in the city raising a total of US$31.2 billion. That is already more than the full-year figure of US$29.7 billion raised last year, according to Dealogic data released exclusively to the South China Morning Post.

Hong Kong’s performance this year puts it far ahead of second-place New York, which has a 9.8 per cent market share with US$19.57 billion raised by 52 companies.

Hong Kong was beaten by New York last year after it lost the Alibaba Group’s record US$25 billion listing. With the e-commerce giant’s listing, the New York market saw US$74.18 billion of fundraising by 118 companies, compared with Hong Kong’s US$29.7 billion.

READ MORE: Three firms look to raise HK$11.4 billion in Hong Kong IPOs

After Hong Kong and New York, Nasdaq is running third with US$17.46 billion and Shanghai fourth with US$17.11 billion. Shenzhen’s ChiNext, which has raised US$4.83 billion so far, is 14th.

“The strong stock market rally in the first half of this year allowed several large brokerage houses on the mainland to conduct IPO in Hong Kong. New York beat Hong Kong last year mainly due to the Alibaba deal. The tables have been turned this year,” said Joseph Tong Tang, executive director of Sun Hung Kai Financial.

Tong said he expects Hong Kong to remain on top of the IPO league table as many mainland firms will still need to raise funds in the city.

“Many mainland companies are in favour of listing in Hong Kong as the market has more international investors. In addition, the mainland IPO market is suspended from time to time. prompting mainland firms to opt for Hong Kong,” he said.

Unlike Hong Kong or Western markets, where companies decide when to go public, the China Securities Regulatory Commission controls the pace of listing and has suspended IPO eight times in the past two decades to tackle bear markets or in response to market malpractices.

The mainland market was most recently suspended between July and early November in the wake of the stock rout that saw market capitalisation in Shanghai and Shenzhen slashed by nearly a third from the mid-June peak.

The mainland IPO market had also been frozen for more than a year from late 2012.

Suspensions like these have worked well for Hong Kong, making it the top IPO market for three years in a row from 2009 to 2011. The 2008 financial crisis that severely dented Western markets and forced some companies – like Italian luxury fashion brand Prada – to list here also worked in Hong Kong’s favour.

READ MORE: Hong Kong IPO crown safe for now, says Morgan Stanley

Despite the good numbers, the quality of some of the new listings has been a cause of regulatory concern, however. Securities and Futures Commission (SFC) chairman Carlson Tong Ka-shing last month said the commission would review the listing regime.

Tong’s statement came after wild swings in some of the new stocks on the Growth Enterprise Market (GEM) and dubious backdoor listings.

It is mostly financial firms that raise money in Hong Kong, with the city failing to attract technology companies to list here. Alibaba opted for New York after Hong Kong regulators refused to allow it dual-class shares.

“The SFC review is likely to tighten up the listing process. This may cut down the number of new listings in Hong Kong. However, it would benefit the industry in the long run as it could allow the Hong Kong IPO market to develop in a more healthy way,” Joseph Tong said. “The SFC review could also seek ways of attracting more technology firms and start-ups to list here.”

Louis Tse Ming-kwong, director of VC Brokerage, said he believes IPOs may slow down next year.

“Many IPOs have not done very well as the market sentiment is weak. Stock market outlook in Hong Kong and the mainland has been affected by the slowdown of the mainland economy,” Tse said.

Bank of Qingdao, which debuted in Hong Kong on Thursday, was trading slightly down, after pricing the stock at the bottom of its indicative price range.