Electronic boards display various stock prices at Exchange Square in Hong Kong on March 9, 2020. (ISAAC LAWRENCE / AFP)

Hong Kong’s initial public offering market is expected to raise up to HK$200 billion ($25.48 billion) this year as a decoupling of Chinese companies from the US market and favorable policies in Hong Kong could lead to a rebound in fundraising activities, according to global accounting company PwC. 

Hong Kong’s IPO market undoubtedly slowed down in the first half of 2022 when compared to the record level of IPO activity in the first half of 2021 ... Many organizations have chosen a wait-and-see approach to economic revival and have postponed their fundraising activities due to market uncertainties.

Eddie Wong, partner of Capital Markets Services at PwC Hong Kong

Having borne the brunt of the ongoing pandemic, geopolitical tensions and global economic uncertainties, the city’s IPO activities made a lackluster start to the year. 

Total funds raised by 22 IPOs in Hong Kong in the first half of 2022 are predicted to reach HK$17.1 billion, down 92 percent from the corresponding period in 2021, the latest data from PwC suggests.

 “Hong Kong’s IPO market undoubtedly slowed down in the first half of 2022 when compared to the record level of IPO activity in the first half of 2021,” said Eddie Wong, partner of Capital Markets Services at PwC Hong Kong during a press conference on Wednesday. 

“Many organizations have chosen a wait-and-see approach to economic revival and have postponed their fundraising activities due to market uncertainties.”

Nevertheless, Wong noted that the city’s IPO pipeline remains robust, with the proven fundamentals of US-listed Chinese enterprises and new economy businesses continuing to be the main drivers of listing activities.

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His remark came after the US regulator flagged a total of 149 US-listed Chinese companies for failing to meet the audit regulations.

These companies will be required to delist from the US market as early as 2024 if they fail to meet the regulations contained in the Holding Foreign Companies Accountable Act passed in December 2020 during the Trump presidency, making Hong Kong an even more attractive hub for homecoming listings.

However, economic growth and liquidity measures from the government and the central bank, have included allowing Greater China companies without weighted voting rights and which are not from innovative sectors to seek secondary listings in Hong Kong. This will attract high-quality US-listed Chinese enterprises to list in Hong Kong and enhance investors’ confidence.

Benson Wong, PwC Hong Kong Entrepreneur Group Leader

There are also over 200 Chinese companies including e-commerce platform Pinduoduo and lifestyle retailer Miniso solely selling shares in the US market, accounting for around 30 percent of the total market value of China concept stocks.

“The second half of 2022 remains challenging due to uncertainties around the pace of economic recovery and geopolitical issues,” said Benson Wong, PwC Hong Kong Entrepreneur Group Leader. 

“However, economic growth and liquidity measures from the government and the central bank, have included allowing Greater China companies without weighted voting rights and which are not from innovative sectors to seek secondary listings in Hong Kong. This will attract high-quality US-listed Chinese enterprises to list in Hong Kong and enhance investors’ confidence,” he said.

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Following on the heels of its rival Singapore Exchange, Hong Kong’s bourse operator also this year gave the green light for special-purpose acquisition companies or SPACs - a streamlined alternative to an IPO that a shell company raises funds and gets listed first then hunts for private companies to merge with.

After the city’s first SPAC Aquila Acquisition raised HK$1 billion in March, Vision Deal HK Acquisition Corp is expected to become the second blank-check firm listed in the city this month. 

Currently, a further 10 SPACs have lodged filings since the beginning of the year, which could bring momentum to the city’s share-selling market by enriching financing choices.

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“With the establishment of two new HKEX offices in the US and Europe next year, we believe Hong Kong will be able to better promote itself as a fundraising destination and attract more international clients and investors to further strengthen its role as an international financial hub,” said Benson Wong. “We remain optimistic about the Hong Kong IPO market over the long run.”