Hong Kong’s moribund IPO market seen revived by deals from innovative, ‘unbelievably huge’ China companies: Citi

‘Within the last five or six years, China has created unbelievably huge companies out of nowhere’, says Citigroup Asia head of investment banking

Hong Kong is ‘a very natural place’ for Chinese and other companies from this region to list, Jan Metzger says

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Jan Metzger, Citi Asia Pacific Investment Banking Head Managing Director, at his office in Champion Tower, Central. Photo: Jonathan Wong

Published: 7:00am, 6 May 2024

Hong Kong’s limping initial public offerings (IPO) market, dealt a crippling blow by rising interest rates and an aversion to Chinese assets, appears to be healing. Investors are tiptoeing back, drawn by a generation of innovative, little-known companies that will also provide a rich vein of investment banking business for years to come, Citigroup’s head of Asian investment banking said.

The city made a sluggish start this year, with 12 IPOs generating HK$4.7 billion (US$601 million) in proceeds in the first quarter, or a 29 per cent drop from a year earlier. Stock exchanges in mainland China managed 30 new listings in the first quarter, which generated 23.6 billion yuan (US$3.3 billion) of proceeds, or a 64 per cent slide from a year earlier.

“Investment banking activity comes in waves, but what is most important to us is that the underlying creation of interesting companies has not stopped in China – and that is really important,” said Jan Metzger, Citi’s Asia head of investment banking.

“Within the last five or six years, China has created unbelievably huge companies out of nowhere, and that trend continues. All of those companies will eventually seek investment banking capabilities as well.”

Jan Metzger, Citi Asia Pacific Investment Banking Head Managing Director, at his offices in Champion Tower, Central. Photo: Jonathan Wong

The third-largest stock market in Asia, the Hong Kong stock exchange has faced a tough time in recent years. Proceeds from new IPOs in 2023 dropped by more than half to a 20-year low of US$5.9 billion, LSEG data shows.

The exchange, which was the world’s top IPO destination for seven of the past 15 years, dropped to the 10th position in the first quarter.