Hong Kong may reclaim spot in top three global IPO markets in second half on a slew of expected mega tech offerings
A total of 180 IPOs raising between US$20b to US$22b is expected for 2018, according to Deloitte
Hong Kong has a high chance of reclaiming a spot in the top three global IPO league table in the second half of the year, with the total capital raised expected to reach as much as HK$140 billion (US$17.8 billion) from a flurry of new economy listings that would include well-known Chinese technology unicorns, according to Deloitte on Tuesday.
The potential pipeline of unicorns and mega listings include smartphone vendor Xiaomi – expected to list soon – and telecoms tower operator China Tower, which has filed a listing application to the Hong Kong stock exchange to raise as much as US$10 billion.
Another potential candidate is ride-hailing firm Didi Chuxing, reportedly considering a Hong Kong initial public offering (IPO) in the second half and hopeful of securing a valuation of between US$70 billion to US$80 billion. Restaurant review and delivery firm Meituan-Dianping is also mulling a Hong Kong listing to raise US$6 billion, according to various media reports.
Others such as mainland Chinese live streaming platform Yingke has also applied for a Hong Kong listing while rival Douyu TV, backed by Tencent, video and photo-sharing app Kuaishou, and online ticketing provider Maoyan Weiying are considering going public in the city.
Hong Kong’s ranking in the global IPO league table slipped to No 5 in the first half of the year in the absence of big IPOs, with total funds raised dropping a two-year low of HK$50.3 billion.
Edward Au, co-head Deloitte China’s national public offering group, expected Hong Kong to climb back to the top three list in the rest of the year.
“Starting July, we are going to see many listings by new economy companies, including some famous Chinese unicorns, thanks to the stock exchange’s listing rule changes,” Au said.
He anticipated at least five mega listings in the second half – each raising more than HK$10 billion – from the so-called new economy sector, like fintech, emerging tech, and consumer industries.
For the year, Au has forecast 180 IPOs to raise a total of between HK$160 billion to HK$190 billion, up 25 per cent to 48 per cent from last year.
“More than half of this year’s IPO fundraising will come from the new economy sector,” he said.
In the first six months, the consumer sector saw the most number of new listings, making up 33 per cent of the total IPOs, up from the 21 per cent recorded for 2017. By value, the sector accounted for 13 per cent of the total funds raised, up from 3 per cent a year earlier.
The biggest IPO in the first half was the US$1.1 billion offering by Ping An Good Doctor, a Chinese online medical service platform and a unit of Ping An Insurance Group.
Still, Au said downside risks included a stronger US dollar that will trigger fund outflows and US-China trade uncertainty that could dent investor appetite, which will affect the listing window of big IPOs.
In mainland China, Shanghai has also benefited from the massive offering of Foxconn Industrial Internet, which collected US$4.2 billion, the second biggest IPO in the world in the first half. Total funds raised on the Shanghai Stock Exchange reached US$9.4 billion for the first half, ranking it the third among global bourses.
Nonetheless, Au expected the Chinese IPO market to become less active in the second half, as regulators tighten IPO approvals to ensure market stability when Chinese depositary receipts hit the market.
The number of IPOs could more than halve to 120 to 160 in 2018, while funds raised would correspondingly drop 13 per cent to 26 per cent to 170 billion yuan (US$26.3 billion) to 200 billion yuan for the year.
“CDRs by big Chinese companies will draw liquidity from the market, and regulators want to maintain the stability and protect small investors from potential wild fluctuations,” Au said.
“The A share market is more fragile, as retail investors account for 90 per cent of the total.”