Hong Kong Stock Exchange

Funds raised on Hong Kong stock market fall to lowest in a decade

Despite a 34 per cent rally in the benchmark index, the total amount raised fell 15 per cent as the city dropped to third in global IPO rankings

PUBLISHED : Wednesday, 27 December, 2017, 7:18am
UPDATED : Wednesday, 27 December, 2017, 11:26am

The total funds raised on the Hong Kong stock market in 2017 dropped to the lowest in almost a decade as the city slipped down the global IPO league table.

Just US$35 billion was raised during the year, down 15 per cent from 2016 and the smallest amount since the financial crisis in 2008, according to data from Thomson Reuters.

This was despite the benchmark Hang Seng Index rallying 34 per cent as of December 22, the strongest annual growth since 2009 at 52 per cent.

However, the surge in share prices has not translated to more new listings or post-listing fundraising.

The total funds raised – that includes the sum raised from initial public offerings, rights issues or placements on the stock market – was the lowest since 2008 when only US$20 billion was raised, the Thomson Reuters data showed.

The funds raised from IPO in Hong Kong dropped to US$13.87 billion, down 45 per cent from 2016. That is the smallest amount raised from IPO since 2012 when the total was US$11.28 billion, the Thomson Reuters data showed.

Hong Kong slipped to third in the worldwide IPO rankings this year, behind New York and Shanghai. The city was the No. 1 IPO market globally in both 2015 and 2016.

Hong Kong set to lose global IPO crown to New York and Shanghai as fundraising halves

The largest IPO in Hong Kong this year was China’s Guotai Junan Securities, which raised US$2.2 billion (HK$17.2 billion), a long way off the US$7.6 billion raised by Postal Savings Bank of China in 2016.

“Hong Kong has to reform its listing regime to attract more large technology firms to list here. It is therefore good to see Hong Kong Exchanges and Clearing (HKEX) propose letting dual-class shareholding structure companies list here next year,” said Christopher Cheung Wah-fung, a broker who is also the legislator representing the financial services sector.

“However, we have to insist any such changes must have shareholder protection safeguards in place.”

HKEX recently announced that from the middle of next year it will allow giant tech firms with multiple class share structures to list here, ending a ban that has been in place since the 1980s. Dual-class arrangements – permissible in US markets and popular with technology firms – allow one class of shareholders more voting rights or higher dividends than others.

Hong Kong overhauls city’s stock listing rules to attract biotech firms, tech giants to raise capital

New York took the lead in IPO funds raised, with US$29 billion in 2017, up 139.2 per cent from 2016. The massive increase was mainly because technology firm Snap Inc, which has dual-class shares, chose New York for its US$3.9 billion IPO.

Hong Kong also lost out to Shanghai Stock Exchange, which has raised US$18.9 billion, up 12.5 per cent from 2016.

The figures show that Hong Kong is failing to attract new technology companies. Only 6.9 per cent of the IPO funds raised here were from tech companies, a long way behind the 49 per cent that came from financial firms, 9.9 per cent from consumer products, 8.9 per cent from media and entertainment, 7.4 per cent from industrials and 7.1 per cent from health-care companies.

Hong Kong ranked 10th worldwide in terms of tech IPOs, behind the likes of New York, Switzerland, South Korea and Shenzhen, the Thomson Reuters data showed.

Dim sum bonds, the yuan-denominated notes issued in Hong Kong, continued to decline this year with just 65.5 billion yuan (US$9.7 billion) raised, a 56.3 per cent decline from 2016 and the lowest since the market started in 2010.

Morgan Stanley leads the rankings of Hong Kong-listed equity market underwriting this year, capturing 16.3 per cent market share with US$5.7 billion in related proceeds. Goldman Sachs and Bank of America Merrill Lynch round out the top three with 11.4 per cent and 5.5 per cent market share, respectively.