US-China trade row a potential blow to the IPO ambitions of Hong Kong and Chinese markets
Deloitte also sees capital flows out of the region after US tax reforms and rate rises as risks to IPOs, but says listing rule reforms in Hong Kong and mainland China should increase the appeal of their exchanges
An escalating US-China trade dispute could be bad news for the initial public share offering ambitions of Hong Kong and mainland Chinese exchanges as companies would be less willing to consider a listing if the markets became volatile, according to accounting and consultancy firm Deloitte.
It added that US tax reform plans and interest rate increases by the Federal Reserve could spur a movement of capital away from Asia, another risk factor for markets.
“The escalating trade war between the US and China will cause continuous market volatility, which will seriously impact big firms’ willingness to publicly sell their shares,” said Edward Au, co-leader of the national public offering group at Deloitte China, at a briefing in Hong Kong on Tuesday.
“The IPO window is especially important for big companies. They may consider delaying their plans if the capital market is volatile. This is a potential big threat to the IPO market [for the rest of the year].”
In the first quarter of this year, Hong Kong saw 64 IPOs raising a total of HK$24.4 billion (US$3.1 billion), up 64 per cent and 84 per cent respectively from the same period a year earlier, Deloitte said.
On the Shanghai and Shenzhen exchanges in the same period, 37 IPOs raised a total of 40.7 billion yuan (US$6.5 billion), down 72 per cent and 42 per cent respectively year on year, as regulators tightened scrutiny to ensure the quality of listed companies.