Hong Kong’s stock market faces a drought of initial public offerings as valuations take a plunge to among the lowest in Asia
- Hong Kong’s average price to earnings ratio is at its lowest in recent years
- Many companies that have filed for listings in city have put IPO plans on hold
Companies looking to list in Hong Kong have put their initial public offerings (IPOs) on hold amid an annual decline of as much as 40 per cent in the valuations of new share offerings in some cases, making the market Asia’s cheapest after Pakistan.
Protests in the special administrative region and the ongoing US-China trade war have rattled investor confidence. The average price to earnings (PE) ratio in Hong Kong currently stands at 10.46 times – its lowest in recent years.
Last year, the ratio, which indicates the dollar amount an investor can expect to invest in a company to receive a dollar of that company’s earnings, stood at 11.30 times. In 2017, it stood at 14.69 times, and at 10.71 times in 2016.
It is also below the S&P 500, whose PE ratio stands at 21.59 times, the Shanghai Composite Index, whose ratio stands at 13.46 times, as well as the Shenzhen Component Index, which stands at 23.76 times.
“When the average market price to earnings ratio is low, investors are interested in investing in existing companies trading at a low PE ratios. It will be hard for new listing hopefuls to bargain for a high valuation,” said Joseph Tong Tang, chairman of Morton Securities.