According to a forecast by PricewaterhouseCoopers (PwC), the IPO market in Hong Kong is expected to gradually recover in the second half of 2023. The recovery is anticipated as interest-rate increases draw to a close, capital markets stabilize, and more companies opt for spin-off activities.
PwC Hong Kong estimates that approximately 100 companies will go public in Hong Kong during the year, raising a total of HK$150 billion to HK$170 billion (equivalent to US$19.1 billion to US$21.7 billion).
In the first six months of 2023, Hong Kong witnessed 30 IPOs, representing an 11% increase compared to the same period in the previous year. However, the funds raised during this period dropped by 14% to HK$17 billion, compared to HK$19.7 billion in the first half of 2022. PwC attributed the rebound in capital markets to the resumption of travel between Hong Kong and Mainland China. Nevertheless, the impact of strengthening inflation and rising interest rates globally has affected investor sentiment.
Despite its slow recovery, Hong Kong managed to secure the third spot among the world's largest fundraising destinations in 2022, with 75 IPOs collectively raising US$12.69 billion. However, this amount reflected a significant decline of 70.5% compared to the US$42.96 billion raised in 2021, as indicated by Refinitiv data.
The cautious approach of investors is contributing to the slow recovery of the IPO market, as companies wait for more favorable market conditions before going public. PwC anticipates a notable increase in spin-off activities in the second half of the year, as companies seek to unlock value and enhance their competitive positions.
Several high-profile IPOs are expected to take place in Hong Kong, including the spin-offs of Alibaba Group Holding's supermarket chain, Freshippo, and logistics arm, Cainiao. Additionally, biopharmaceutical manufacturer HighTide Therapeutics and artificial intelligence and electronics company Mobvoi are projected to launch IPOs, with estimated fundraising reaching up to US$500 million.
Eddie Wong, partner of capital markets services at PwC Hong Kong, believes that government policies aimed at supporting local innovation and technology, coupled with relaxed listing requirements for specialist technology companies under the new Chapter 18C of the listings regime, will attract more technology firms to establish or expand their presence in Hong Kong. In the second half of 2023, PwC expects an increase in new economy businesses, particularly in the biotechnology and specialist technology sectors, choosing to list on the Hong Kong stock exchange.
PwC also expresses hope that the governments of Hong Kong and Mainland China will expand the scope of Stock Connect, thus creating more opportunities for businesses and investors. In the first half of the year, Mainland China exchanges experienced a decline in A-share IPOs, with a projected 5% year-on-year drop in the number of IPOs and a 38% decrease in funds raised, estimated to be around 190 billion yuan (equivalent to US$26.6 billion). However, the Shanghai and Shenzhen Stock Exchanges continue to maintain their top positions globally in terms of fundraising. PwC predicts that by the end of the year, up to 330 A-share IPOs will take place on Mainland China exchanges, raising funds totaling 500 billion yuan, reinforcing China's status as the leading global IPO market.
By fLEXI tEAM