Hong Kong’s capital market posts best nine months since 1980 as Chinese companies redirect IPOs closer to home from New York
- As many as 71 companies raised a combined US$35.9 billion on Hong Kong’s main board this year from initial stock sales and secondary listings
- Seven out of the top 10 IPO in Hong Kong this year were US-listed Chinese tech giants
The capital market of Hong Kong is having its best nine months on record, as a flurry of Chinese companies redirected their fundraising exercises to the city from New York amid lingering US-China geopolitical tension.
As many as 71 companies raised US$35.9 billion in the first nine months of 2021 through initial public offerings (IPOs) and secondary listings in Hong Kong, according to data compiled by Refinitiv. That was a jump of 25 per cent from the same period last year, making it the best nine months since records began in 1980, Refinitiv said.
The bonanza propelled the main board of the Hong Kong stock exchange to the world’s third-largest financial bourse, after the New York Stock Exchange (NYSE) and Nasdaq. That put Hong Kong ahead of the main board and the Star Market in Shanghai, and ChiNext in Shenzhen, according to Refinitiv’s data. Up to 96 per cent of the fundraising during the first three quarters were by companies whose businesses are based in mainland China, a trend that is likely to continue, brokers said.
“Hong Kong’s IPO market will continue to be strong in the fourth quarter, and in the coming years,” said Joseph Tong Tang, chairman of Morton Securities. “China‘s tightening policies for technology companies to list overseas, as well as tougher US financial disclosure requirements, will [lead to] more mainland firms listing in Hong Kong instead of the US.”
“Hong Kong will certainly be the first choice for Chinese companies seeking to list outside China,” said Tong.
Nasdaq tops the global league table in the first nine months, with 256 companies raising a combined US$66.17 billion, while New York was second with 80 companies raising US$47.44 billion, Refinitiv’s data showed.
“Not all of these companies will necessarily seek to raise funds in the fourth quarter, as market sentiments have been hit by heightened regulatory scrutiny and restructuring efforts in certain sectors of China’s economy, including new-economy companies that handle a large amount of data, education, and real estate,” said Edward Au, southern region managing partner of Deloitte China, in a media briefing on Friday.
A volatile market may not help companies to raise funds at a high valuation, he said, adding that there are unlikely to be any secondary listings by US-listed Chinese companies in the final three months of the year.
“We are seeing some popular IPOs such as Tam Jai International in the market now,” Tse said. “As long as market sentiments continue to improve, we are cautiously optimistic about the IPO market in the fourth quarter.”