IPO revival primes Hong Kong for another busy year

With city on track for No 2 spot this year, breach of HK$200b mark flagged for 2014

PUBLISHED : Monday, 23 December, 2013, 4:47am
UPDATED : Monday, 23 December, 2013, 5:23pm

Hong Kong is expected to finish a close second to New York in money raised through initial public offerings this year and may do even better next year, bankers and auditors say.

KPMG, one of the Big Four auditing firms, forecasts that funds raised in Hong Kong listings will cross HK$200 billion next year, compared with about HK$160 billion this year.

Rebecca Chan, a partner with KPMG's China capital markets group, said this year was ending on "a high note for the Hong Kong IPO market".

"The key driver for next year is expected to be a larger number of sizeable deals, including large IPOs from spin-offs of local listed companies that would each raise more than HK$30 billion," she said.

Chan would not name any "sizeable deals", but one that market participants expect to land on the Hong Kong stock exchange is Alibaba, the mainland's No1 e-commerce firm.

Alibaba, founded by former teacher Jack Ma Yun in Hangzhou in 1999, postponed a potential HK$100 billion Hong Kong listing this year. Bankers say it is likely to launch a flotation in the city next year after communication with the Hong Kong government and regulators improves.

KPMG forecasts 100 companies will list in Hong Kong next year. A new wave of medium-sized H-share flotations for private enterprises could be a key driver for the listings market in the coming year, with more companies likely to consider making a move after the China Securities Regulatory Commission relaxed criteria and simplified approval procedures for overseas share issues and domestic listings by mainland enterprises.

The CSRC announced long-awaited reforms late last month designed to speed up the application process and cut red tape.

Ringo Choi, Asia-Pacific IPO leader at Ernst & Young, another Big Four auditing firm, said this year marked "the end of a two-year decline in IPO activity".

"The improving macroeconomic backdrop, easing global monetary conditions, reduced political uncertainty and rising investor confidence in key markets saw the year end on a high note, exceeding expectations," he said. "The stage is set for this momentum to continue across all regions and we expect strong levels of activity in the United States and Europe, with private equity continuing to be a key driver. This year saw 182 private-equity-backed deals raise US$56.4 billion, accounting for 35 per cent of global proceeds."

Choi said he also expected to see more floats in Hong Kong next year due to "a number of significant spin-offs of local Hong Kong companies". Sectors that would lead the way included financial, technology, real estate and health care, he said.