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An employee on an assembly line that produces speakers at a factory in Fuyang city, in China’s eastern Anhui province, on November 30, 2022. Photo: AFP.

Hong Kong may get a leg up in hosting IPOs in 2023, as China’s post-Covid reopening boosts sentiment for companies raising funds

  • Xiamen International Bank may raise about HK$10 billion (US$1.3 billion), while Ruqi Mobility could also be in the market
  • China’s onshore market meanwhile saw a record year for IPO proceeds at US$93.5 billion in 2022
After the worst year for initial public offerings (IPOs) in Hong Kong since the financial crisis, bankers and analysts expect a recovery in listings in the Asian financial hub as China moves forward with reopening plans.

Proceeds raised in the city totalled US$12.9 billion in 2022, down 70 per cent versus last year, outpacing the 29 per cent contraction in the Asia-Pacific as a steady flow of deals in mainland China helped boost the broader region.

Hit by Beijing’s regulatory clampdowns, Covid policy and a property crisis on top of concerns over global interest-rate hikes, Hong Kong deals shrank in size this year. While large offerings may take a while to recover, market watchers see a number of mid-sized Hong Kong deals in the first quarter amid rising optimism over the Chinese economy.

“With the transition toward a reopening, we anticipate several delayed Chinese IPOs and follow-on transactions to occur in the near term,” said Murli Maiya, head of equity capital markets for Asia-Pacific at JPMorgan in Hong Kong, adding “these are more likely to be either onshore or in Hong Kong rather than the US.”

Redefining fintech

Additional share sales increased in the fourth quarter as China announced support for the real-estate sector, triggering hopes for a rebound in the beaten-down sector. Increased placements and sales of share blocks are seen as positive for IPOs as well, as they indicate issuer and investor appetite.

“With China opening up, everyone is hoping that next year will be a better year – because there is a solid IPO pipeline, with a series of companies that have submitted applications for listings or are waiting to do so,” said Victoria Lloyd, a partner in Baker McKenzie’s capital markets practice in Hong Kong. “I am actually quite positive that after Lunar New Year the pipeline will pick up.”

Why the Hong Kong stock market is making a massive comeback

Some of the companies seeking to list in Hong Kong are Xiamen International Bank, which could raise about HK$10 billion (US$1.3 billion), and Ruqi Mobility, state-backed carmaker GAC Group’s ride-hailing unit, Bloomberg reported.

China’s onshore market meanwhile saw a record year for IPO proceeds at US$93.5 billion in 2022, helped by Beijing’s efforts to discourage overseas listings and promote the local market. The trend is expected to continue next year as more developers seek to raise funds through equities.

Elsewhere in Asia, India is seen remaining active for mid-size deals from various sectors after a series of flops by recently listed unicorns. Thailand is expected to continue dominating Southeast Asia. A rebound in South Korea offerings may take time as companies have difficulties achieving desired valuations.

“We’re going to open next year in similar fashion to what we have experienced in the second half of this year,” with IPOs in Hong Kong remaining challenging, said Tucker Highfield, managing director and co-head for Asia-Pacific equity capital markets at Bank of America in Hong Kong. “That said, there could be some brighter spots coming out of India and Southeast Asia.”