Companies looking to raise funds through initial public offerings in Hong Kong are having to settle for lower valuations as uncertainties stemming from geopolitical tensions, the coronavirus pandemic and China’s new rules for offshore listings curb investors’ appetite for new shares. The number of IPOs and proceeds raised in Hong Kong in the opening weeks of 2022 have plummeted from a year ago. Many new issuers and their bankers are postponing their deal launches as they wait for market conditions to improve. Those that decide to press on have little choice but to price their IPOs lower, raising a much smaller amount than they had wished for when they first made their submissions to the Hong Kong bourse. “Uncertainty is a big turn-off for investors. With geopolitical risks rising in Ukraine , and the lack of visibility on when the Omicron variant will subside, some new issuers prefer to wait and postpone their deals until the outlook improves,” said Kenneth Ho, managing director of equity capital markets at Haitong International, based in Hong Kong. He said there is still “good liquidity from investors” for companies with a solid track record. Just six IPOs have been completed this year as of February 18, raising a combined US$1.1 billion. That is an 87 per cent plunge from the US$8.6 billion raised by 20 IPOs in the same period a year ago, data from Refinitiv shows. The biggest deal of 2022 so far has been the secondary listing by rare-earth magnet producer JL Mag Rare-Earth , which raised US$544.6 million. That pales compared to the mega IPO last January of Kuaishou Technology , which raised US$5.4 billion as investors jostled to get into the short-video platform at a time when valuations for tech stocks hovered at feverish highs. All six IPOs this year were priced at the low end of the indicative ranges initially marketed to investors, according to Refinitiv and individual prospectuses. In contrast, some 37 per cent of last year’s IPOs were priced at the top end, data from EY shows. It means some of the most recent issuers, such as e-commerce platform Huitongda and artificial intelligence solutions provider Qingdao AInnovation Tech, had to accept much lower proceeds than they had targeted. The scaled down IPOs also clipped their market valuations when they debuted on the Hong Kong stock exchange. As one of the world’s top three IPO venues last year based on Refinitiv’s rankings, Hong Kong stock exchange raised US$42.6 billion from 95 IPOs. Mega deals like that of Kuaishou kept the city’s IPO scene busy in the first half of 2021, helping to cushion a drop in the second half. But a more challenging environment this year has sapped IPO momentum. Geopolitical tension edged up further on Tuesday as Russian president Vladimir Putin ordered troops into Eastern Ukraine, paving the way for further escalation and drawing condemnation from the US and its European allies. In Hong Kong, a record 7,533 Covid-19 cases were confirmed on Monday, as the Omicron variant sweeps through the city. The resurgence has overwhelmed hospitals, forced businesses to close and threatened the city’s status as an international financial centre. Issuers and bankers are also being put off by confusion over whether Chinese issuers – which account for almost 98 per cent of IPO proceeds raised in Hong Kong – will need to jump through more regulatory hoops in the future when they seek a listing in Hong Kong. The Cyberspace Administration of China (CAC) is yet to officially clarify whether a company handling the data of more than a million users seeking to list in Hong Kong must file for a cybersecurity review. A recent interpretation endorsed by the country’s cyberspace watchdog appears to suggest the answer is yes. China’s cybersecurity review system came under the spotlight last summer after ride-hailing giant Didi Chuxing defied the wishes of Chinese regulators by going ahead with a US$4.4 billion IPO in New York without completing cybersecurity clearance. The episode led to a series of new laws being proposed that would put more scrutiny on Chinese companies’ offshore listing plans.