In this file photo dated Oct 28, 2022, a woman walks past a Hong Kong Stock Exchange sign in Hong Kong. (PHOTO / AFP)
Hong Kong’s IPO market witnessed a significant downturn, with fundraising plunging 61 percent year-on-year to a 10-year low of HK$24.7 billion ($3.16 billion) in the first three quarters of the year, according to a report by accounting and consulting firm Deloitte.
In the same period, 44 IPOs were executed — also the lowest in a decade.
The global mega-sized IPO markets also witnessed a noteworthy decline in the first three quarters of this year, as there was a significant 54 percent decrease in the total financing amount of the top 10 IPOs worldwide compared to the previous year
The report attributed the downturn to various external factors, including multiple interest rate hikes by the US Federal Reserve, the bankruptcy of several US banks, and a debt crisis in the mainland real estate industry.
The Hong Kong stock market remained weak in the third quarter, with stock valuations affected by macroeconomic developments, particularly the US interest rate hikes, said Robert Lui, Southern Region Hong Kong offering services leader of the Capital Market Services Group at Deloitte China. Only one large offering and two China concept stocks will have listed by the end of September.
“Many IPO candidates continue to wait and see for a turnaround in market valuations while preparing and planning their offerings,” he said. However, Lui stressed that with Hong Kong’s unique advantages and reforms on its listing regime, it remains Pre-IPO companies’ preferred choice.
Edward Au, Southern Region managing partner at Deloitte China, explained that although the US Fed decided not to increase interest rates again after its meeting earlier this week, it has indicated another rise is probable later this year, and the Fed is set to maintain high interest rates for a longer time.
“This will add uncertainty and affect the listing windows of potential issuers in Hong Kong,” he said.
“As we wait for market fundamentals to improve, it is a good time to think about how to attract and get more overseas companies to list in Hong Kong on top of signing agreements with other foreign stock exchanges,” he added.
Au said that Hong Kong should explore options to expand its market and improve connectivity with the mainland market. This can be achieved by enriching renminbi-denominated investment products and attracting more funds from both mainland and other markets. Furthermore, establishing a multitier and diverse IPO market is recommended, he said.
“The capital market should change in a way that can help professional investors, venture capital and private equity investors to unleash and drive the market, in order to support the Hong Kong IPO market and its ecosystem for long-term, healthier development,” Au said.
The global mega-sized IPO markets also witnessed a noteworthy decline in the first three quarters of this year, as there was a significant 54 percent decrease in the total financing amount of the top 10 IPOs worldwide compared to the previous year, according to the report.
This file photo dated July 31, 2021 shows the statues on the square of Hong Kong Exchanges and Clearing Limited (HKEX) in Hong Kong. (PHOTO / XINHUA)
The report also revealed that the Shanghai Stock Exchange is expected to have 89 IPOs, raising 179.2 billion yuan ($24.56 billion) by the end of the third quarter, while the Shenzhen Stock Exchange will have 115 IPOs, raising around 133.3 billion yuan. Additionally, the Beijing Stock Exchange will have 59 new listings, raising 10.9 billion yuan.
Meanwhile, Shanghai’s STAR Market is expected to have the highest amount of IPO funds, while ChiNext is set to have recorded the most deals. Notably, the proceeds raised in these two markets is projected to exceed those raised on the Shanghai and Shenzhen main boards.
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