Hong Kong IPOs surge to record high for the third quarter as listings in the rest of the world plunge

Hong Kong also surpasses the US in IPO fundraising for the third quarter, thanks to China Tower’s US$7.5b and Meituan Dianping’s US$4.2b listings

PUBLISHED : Wednesday, 03 October, 2018, 10:03am
UPDATED : Wednesday, 03 October, 2018, 10:50am

Hong Kong attracted the largest number of initial public offerings ever for any single third quarter as the new listing rules implemented in April attracted some big tech flotations, while globally the number for equity market deals plunged 21 per cent to a three-year low, according to data from Dealogic on Tuesday.

Forty-seven IPOs launched on the Hong Kong market in the July to September period, raising a combined US$16.4 billion, overshadowing the US$14.9 billion raised on US exchanges.

The biggest listings during the period included telecoms tower operator China Tower’s US$7.5 billion offering and food delivery service app Meituan Dianping’s US$4.2 billion fundraising.

Together with Xiaomi’s US$5.4 billion IPO in June, they comprised three of the top five global offerings so far this year.

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During the third quarter, the Hong Kong stock exchange also saw 126 IPO filings, taking the overall number in the first nine months of 2018 to 340, up 48 per cent for the whole of 2017.

The surge was helped by the new listing rules that allow companies with dual-class share structure and pre-profit biotech firms to launch IPOs, Dealogic said in its latest equity capital market (ECM) report.

The post-IPO performance, however, has been “mediocre”, reflecting a sharp turnaround in investor sentiment.

IPOs larger than US$100 million fell by an average 16 per cent from their offer price in the third quarter.

Only 30 per cent of the IPOs recorded a retail subscription rate of 15 times or more in the third quarter. That ratio is sharply lower than the second quarter when 77 per cent of the IPOs were oversubscribed 15 times or more. The drop in the ratio indicates a sharp reduction in investor enthusiasm.

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Backed by the IPO activity, Hong Kong’s ECM volume also climbed to US$20.6 billion, the highest third-quarter figure in eight years. ECM activities usually include IPOs, private placements, and transactions on the secondary market to help companies raise equity capital.

Nonetheless, Hong Kong’s hot ECM market was in contrast to the global landscape. Global ECM volume fell 21 per cent year on year to US$158.4 billion from 1,230 deals, the lowest third-quarter level since 2015.

Technology led all sectors globally, contributing 21.9 per cent of the total quarterly deal volume for ECM.

Morgan Stanley topped the global ECM bookrunner ranking in the third quarter, with a 9.26 per cent share, followed by Goldman Sachs’ 9.25 per cent and JP Morgan’s 8.8 per cent.

In the US, cross-border Chinese IPO activities were also strong.

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Twelve Chinese firms raised US$3.5 billion from the US market in the July to September period, which would have been a record third-quarter if Alibaba’s US$25 billion IPO in 2014 is excluded.

During the same period, Chinese IPOs also made up the lion’s share for overall cross-border IPO volume in the US, which reached US$5.7 billion. In the second quarter, the overall cross-border IPO volume was only US$1.4 billion.

The two largest IPOs in the US during the third quarter were both from China – online discounter Pinduoduo’s US$1.5 billion listing and electric car maker Nio’s US$1 billion offering.

Separately, PwC Hong Kong predicted in a report on Tuesday that Hong Kong will reclaim the global IPO crown this year with an projected fundraising amount of HK$300 billion (US$38.2 billion).

In 2017, the city lost the top IPO spot to New York after two straight years in the position and slipped behind Shanghai for the first time, according to data from Dealogic.