Hong Kong regains IPO crown as deal frenzy sets new records in first half

Hong Kong capital markets broke records across the board in the first half of the year, according to exclusive preliminary data that reveals a surge in equity, bond and merger activity that sets the city's financial sector on course for a bumper 12 months.

Equity and equity-linked capital raisings soared more than threefold in the second quarter from the first to bring the first-half total to US$52.2 billion - the strongest six-month period on record, according to data provider Thomson Reuters - helping the city recapture its crown as the global leader for initial public offerings, eclipsing both Shanghai and New York.

"A robust pipeline of Chinese new listings in Hong Kong will further boost proceeds," Thomson Reuters said in a statement to the South China Morning Post. "This includes the upcoming [flotation] of Guolian Securities and Universal Medical Financial & Technical Advisory Services on the Hong Kong stock exchange that could raise as much as US$1 billion."

Funds raised from listings in Hong Kong jumped 37.5 per cent year on year to US$16.5 billion, including the US$5 billion deal by Huatai Securities - the biggest flotation in the world so far this year.

Follow-on stock offers, meanwhile, raised US$35.6 billion in the first half, a 258 per cent year-on-year increase. A US$4.2 billion placement by Haitong Securities was the standout transaction during the six-month period.

Morgan Stanley raised more money in equity markets for its clients than any other in the first six months, topping the league table with a 9 per cent market share worth US$4.7 billion. UBS and Goldman Sachs were second and third, respectively, with shares of 7.1 per cent and 6.9 per cent.

Merger and acquisition activity was similarly robust, with announced deal value involving Hong Kong firms reaching a whopping US$179.6 billion during the period, up 57.1 per cent on a year earlier and setting a record for any semiannual period.

Activity was driven by the restructuring of Li Ka-shing's flagship firms.

Li's move to reorganise Cheung Kong (Holdings) and Hutchison Whampoa into two new entities - one focused on property, the other a holding company for a range of business assets - was itself the single biggest-ever M&A transaction in Asia-Pacific.

Its US$45.4 billion price tag beat the previous record of US$42.2 billion set last year when Citic Pacific took control of Citic Group's main asset in a restructuring.

Li's activities elsewhere also served to boost M&A volume. The spin-off of Cheung Kong's property business to shareholders this month was valued at US$35.6 billion and Hutchison's pending acquisition of British phone firm O2 from Spain's Telefonica carries a price tag of US$15.4 billion.

Deals involving Li's empire totalled US$103.7 billion in the first half, accounting for about 16.2 per cent of all M&A activity in Asia-Pacific so far this year, according to Thomson Reuters data.

HSBC Holdings leads the Hong Kong league table for M&A financial advisory work, courtesy of involvement in Li's deals, which give it a credit in the rankings of US$102.2 billion. The bank also jumped to second spot in Asia Pacific-wide rankings from 23rd a year earlier.

Debt issuance was also robust. Hong Kong dollar-denominated bond sales raised HK$57.9 billion, an increase of 34.6 per cent on a year ago.

"This is the highest first-half period for Hong Kong dollar-denominated bonds since 2012 when proceeds amounted to HK$79.8 billion," Thomson Reuters said.

It was a different story in yuan-denominated debt, however, where net proceeds declined 50.7 per cent from a year earlier to 108.3 billion yuan.