Hong Kong to remain among top three IPO markets globally in 2020, raise HK$260 billion, PwC says

Hong Kong will continue to rank among the top three centres globally for initial public offerings in 2020, with 180 companies expected to raise as much as HK$260 billion (US$33.4 billion), accounting firm PricewaterhouseCoopers said in its “IPO Market Year End Review for 2019 and Outlook for 2020” report on Thursday.

While the forecast was 17.6 per cent lower than last year’s total of HK$315.5 billion, the highest amount raised in a single year since 2010, it was in line with the average of the past 10 years, Eddie Wong, partner at PwC Hong Kong’s IPO and capital markets services, said.

He said the city would remain among the top three IPO markets worldwide this year. “The listing regulation reforms in April 2018, including the weighted voting rights and biotechnology listing regulations reform, have not only enhanced the diversification of Hong Kong’s capital market, but laid an important foundation for the Hong Kong IPO market,” Wong said.

“In addition, a total of 23 overseas companies were successfully listed in Hong Kong in 2019. [Such] listings … are expected to remain active in 2020, with the possibility of increasing numbers compared with 2019.”

Last year, the stock exchange’s main board raised HK$314.5 billion through 169 IPOs, claiming the crown of the world’s largest listings market for a seventh time in 11 years. GEM, the smaller secondary board, raised HK$1 billion, PwC said.

And key to Hong Kong retaining this crown in 2020 will be its ability to attract listings by giant companies, said Jeffrey Chan Lap-tak, founding partner of investment firm Oriental Patron Financial Group.

“We have more than 10 IPOs going on at the beginning of this year, but they are raising only a small amount of money. Hong Kong will need to attract US-listed technology giants [and for them] to follow in the footsteps of Alibaba and have a secondary listing here,” Chan said. “It is possible, as Alibaba’s share price and turnover have been doing well since its listing here,” he added.

Alibaba Group Holding, which owns the South China Morning Post, rose 1.5 per cent on the first trading day of 2020 on Thursday to HK$210.2, 19 per cent higher than its IPO price.

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Its secondary listing in Hong Kong, which raised US$12.9 billion late last year, was made possible by the reforms introduced in 2018. In 2016, for instance, only 3 per cent of the funds raised in Hong Kong were by technology companies, compared with 69 per cent by financial companies. Following the introduction of the reforms, e-commerce became the largest IPO segment in Hong Kong last year, at 26.3 per cent, while financials dropped to 9 per cent, according to financial markets data provider Refinitiv.

Alibaba’s secondary listing, along with Budweiser Brewing Company APAC’s US$5.7 billion listing, pushed Hong Kong past second-placed Nasdaq, which raised US$27.5 billion last year. Saudi Arabian petroleum and natural gas company Saudi Aramco’s US$25.6 billion IPO – the world’s biggest ever – could only boost the Saudi Stock Exchange, or Tadawul, to third place.

“In the long run, we are very confident that Hong Kong will continue to be the best financing platform in the region, as we predict that more new economy companies [will] list here,” said Benson Wong, PwC Hong Kong’s entrepreneur group leader. “This will help Hong Kong continue to establish its position as the most important Asian IPO fundraising hub.”

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The accounting giant was also positive about mainland China’s IPO market, and expected 220 new listings to raise 250 billion yuan (US$35.9 billion) – similar to last year’s levels – in 2020.