IPO crown eludes Hong Kong as Xiaomi does not live up to its blockbuster billing

Hong Kong stays at No 3 even as the number of IPOs and amount jumps to US$11.47b during the first half, a far cry from the US$19.42b raised by 42 companies in New York

PUBLISHED : Monday, 02 July, 2018, 10:01pm
UPDATED : Monday, 02 July, 2018, 11:21pm

Hong Kong stock exchange’s listing reform helped to boost the amount of funds raised from IPOs by 78 per cent to a three-year-high in the first half, but that was still not enough to topple New York from the top global IPO spot, according to data from Thomson Reuters.

With Xiaomi’s IPO not living up to its expectations of raising US$10 billion and some Chinese tech firms opting for a listing in the US and Shanghai, Hong Kong could only maintain its No 3 global IPO ranking in the first half, the same as last year.

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The exchange’s main board and GEM, formerly known as the Growth Enterprise Market, together accounted for a combined US$11.47 billion from 96 initial public offerings in the first six months of 2018 versus US$6.45 billion from 66 companies in the same period in 2017. It was also the highest amount raised in the first half after US$17.53 billion in 2015.

The NYSE retained its top spot, with IPOs from 39 companies raising US$19.46 billion in the first half, slightly up from US$19.1 billion from 43 IPOs in the same period of 2017.

The Nasdaq Stock Market leapt to second place from fifth last year, thanks mainly to iQIYI, a Baidu-backed Netflix-style streaming video services provider, which raised US$2.42 billion in March. Overall 73 companies raised US$11.69 billion in the first half, more than three times the US$3.67 billion from 37 IPOs a year earlier.

Shanghai slipped to No 4, down from No 2 last year. The funds raised in the first half dropped to US$8.68 billion from 33 IPOs, down 14 per cent from US$10.06 billion from 112 IPOs a year earlier.

The HKEX in April carried out the ever largest listing reform in 25 years to allow technology companies with dual-class shareholding structure and biotech firms without revenue to list.

This has attracted a number of applicants including the world’s fourth-largest smartphone maker Xiaomi to raise HK$37.05 billion (US$4.72 billion) last month.

Xiaomi’s US$4.72 billion IPO ranked as the second-largest IPO worldwide in the first half, as it was pipped by Siemens Healthineers, which raised US$5.17 billion in Frankfurt in March. Foxconn Industrial Internet took the third spot, raising US$4.26 billion in Shanghai in May.

The city was the top IPO market in 2015 and 2016 as well as from 2009 to 2011.

“Hong Kong should be able to reclaim its top IPO position this year,” said Joseph Tong Tang, chairman of Morton Securities. “The listing reform has just begun to attract technology companies with dual-class shareholding structure and biotech firms without revenue to apply for a listing in Hong Kong. Xiaomi is only the beginning of a wave of technology firms that will list here.”

Hong Kong loses IPO crown to New York; slips to No 3 globally, first half data shows

He said that the listing reform means that Hong Kong can now compete with the US for the IPOs of mega technology and biotech firms, while adding that the ongoing trade dispute between the US and China could also discourage mainland companies from listing in the US.

Xiaomi is only the beginning of a wave of technology firms that will list here
Joseph Tong Tang, chairman of Morton Securities

Charles Li Xiaojia, CEO of bourse operator HKEX, said he expected over a dozen technology companies to list in Hong Kong this year under the new listing rule.

Stephen Chan Yiu-kwong, a partner at law firm Dechert, also foresees many more applications in the second half.

“There seems to be a lot of interest from new economy companies and biotech firms as many of them are now in the preparation stage of their listing applications,” Chan said. “Given the high demand for Ping An Good Doctor’s IPO in April, many potential applicants are confident that their IPOs will be well-received in Hong Kong.”

HKEX chief expects more IPOs under Hong Kong’s new listing regime after summer break

The listing reform has also helped the city to reduce its reliance on financial firms, according to Thomson Reuters data. Telecommunications firms represented 41.4 per cent of the IPO funds raised in the first half as Xiaomi was put in this category, followed by financials at 19.8 per cent and technology at 11 per cent.

In the first half of 2017, financial firms accounted for 59 per cent of the funds raised and technology firms 0.8 per cent. There were no IPOs from telecom firms.