Medical and tech firms to lead next IPO wave
Advanced medical and internet technology firms are poised to overtake state-owned financial institutions in listing in Hong Kong as the mainland seeks to boost domestic consumption.
Accounting firms Deloitte and KPMG say the city is attracting a more diverse range of listing candidates, with mainland companies encouraged by Hong Kong's proximity and sound legal framework, even though e-commerce giant Alibaba decided to seek a listing in New York instead.
"The health-care-system reform [on the mainland] as well as an increase in household spending have well underpinned the majority of buying interest among investors in Hong Kong, even though the motherland's economic output is slowing moderately," said Edward Au, a partner at Deloitte who specialises in Hong Kong and mainland listings.
"With the world's largest consumer market, the mainland's internet sector remains sound, even though there has been a marked decline in tech stocks."
Rebecca Chan, a partner at KPMG, said high-flying internet technology firms showed lots of promise for investors and the city's listings market after a spate of prominent acquisitions and the strong stock price performance of their listed peers.
Listings of health care and consumer-related companies represented 48 per cent of the number of offerings in the first quarter, Deloitte said, compared with just 18 per cent in the same period last year.
The sectors that have traditionally dominated mainland firms listing in the city - property developers, manufacturers, and energy and resources firms - accounted for 39 per cent of total listings in the first quarter, compared with 64 per cent in the same period last year.
The amount of capital raised in the city jumped more than 460 per cent over the same period to HK$46 billion, largely due to the HK$24.1 billion spin-off of HK Electric Investments and the HK$8.7 billion float of Harbin Bank.
Of the 15 firms listed this year, 11 are trading below their initial public offering prices.
After several failed attempts, the mainland embarked in April 2009 on health care reforms that aim to provide affordable medical care for the population by 2020.
Premier Li Keqiang announced last month that the reforms would be deepened this year, allowing more private investment and strengthening public health care services.
With an annual growth rate of between 15 and 20 per cent, the mainland's spending on health care is set to rank second in the world next year behind the United States, according to the Council on Foreign Relations, a US think tank.
It said Chinese spending would reach US$900 billion by 2020, while consulting firm McKinsey said it would reach US$1 trillion by then, up from US$357 billion in 2011.