Hong Kong Stock Exchange

Hong Kong’s IPO market has poorest first half since 2013

Deloitte says total annual proceeds from a projected 115 deals could end up being 24 per cent lower, at HK$200 billion

PUBLISHED : Wednesday, 22 June, 2016, 3:09pm
UPDATED : Wednesday, 22 June, 2016, 8:44pm

Hong Kong’s initial public offering (IPO) market has had its worst first six-month performance since 2013, due to uncertainties over China and the global economy, Deloitte said on Wednesday.

A total of 38 companies raised HK$43.5 billion in Hong Kong in the first six months, 66 per cent down year on year, while proceeds raised in the second quarter were less than half of the first, Deloitte’s figures show.

The number of IPOs by mainland companies and their valuations also both dropped from last year, said Edward Au, co-leader of national public offerings for Deloitte China.

The two biggest IPOs in the first six months were completed by mainland based China Zheshang Bank and BOC Aviation, the aircraft leasing unit of Bank of China.

But proceeds from the two totalled just HK$42.4 billion, a third of the HK$128.4 billion raised in same period last year, Deloitte said.

Hong Kong remains an ideal IPO market for mainland companies, although we noticed some mega property developer delist from Hong Kong this year
Edward Au, Deloitte China

However, Hong Kong still outperformed other markets globally in terms of fund raising, Au said.

And with the global economy expected to brighten in the second half, he predicts Hong Kong’s IPO market to become more active in the second half.

Deloitte now estimates there will be 115 IPO deals for the whole year, raising HK$200 billion in total, 24 per cent lower than last year.

In the mainland, Deloitte said 55 companies raised HK$31.8 billion on the Shanghai and Shenzhen bourses, meaning the number and fund raising total both declined significantly from last year.

After mainland authorities shelved plans for a simplified IPO approval system earlier this year, the pipeline of companies waiting for new offerings on the A-share market has grown significantly.

“Hong Kong remains an ideal IPO market for mainland companies, although we did notice some mega property developers delist from Hong Kong and head for the A-share market this year,” said Au.

He added that tightened supervision by mainland regulators on so-called back-door listings was also making IPOs more difficult there.

Dalian Wanda Group, chaired by billionaire Wang Jianlin, announced plans in late May to offer shareholders HK$52.80 per share to privatise its Hong Kong-listed property unit, Dalian Wanda Commercial Properties, and relist on the A-share market, in the hope of achieving a higher valuation.

Deloitte said companies in the property sector still dominated the IPO market in the first six months, taking up 29 per cent of all deals.

“Hong Kong still offers a positive market for growth potential by mainland property developers,” Au said.

Bloomberg reported on Tuesday that CDB Leasing, an arm of China’s biggest lender, is preparing an IPO in Hong Kong to raise as much as US$978 million, with 79 per cent of the base deal sold to cornerstone investors.