Effects of China’s regulatory onslaught felt in Hong Kong as large IPOs fall by the wayside

Health care start-up We Doctor and supermarket operator WM Tech among those that have let their IPO applications lapse due to regulatory scrutiny, market weakness

The value of IPOs dipped to US$6.2 billion in the third quarter – the lowest since the start of the pandemic and behind South Korea for the first time in four years

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The Exchange Square complex, which hosts the Hong Kong stock exchange. Photo: Sam Tsang

Published: 11:32am, 17 Oct 2021Updated: 9:42pm, 17 Oct 2021

Hong Kong’s primary-listing market is going through a dry patch in what is normally the busiest time of the year.

Several potential billion-dollar initial public offerings ranging from supermarket owner WM Tech to health care start-up We Doctor Holdings have let their applications lapse in recent weeks as regulatory scrutiny and stock market weakness crimps listings.

Large IPOs falling by the wayside are a further sign of how China’s regulatory onslaught is causing a downturn in the financial hub’s market for first-time share sales. President Xi Jinping’s push to align companies with his vision of “common prosperity” has caused a roadblock and Hong Kong equity benchmarks are the world’s worst this year.

“Where the wind blows largely depends on the industry of the IPO-aspirant,” said Justin Tang, head of Asian research at United First Partners in Singapore. “Companies in the consumer tech and real estate related sectors will continue to experience headwinds in the form of the ‘common prosperity’ campaign and regulatory reforms.”

After a stellar first half, the value of IPOs dipped to just US$6.2 billion in the third quarter – the lowest since the start of the pandemic and behind South Korea for the first time in four years. To be sure, 2021 will still likely rank highly in terms of IPO proceeds thanks to the sheer volume of issuance in Hong Kong in the six months. With US$37.7 billion raised so far, this year is on track to be one of the best of the last decade.

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