Hong Kong behind NYSE, Nasdaq in IPO rankings in first half of 2019 as extradition bill and trade war weigh on sentiment

Enoch Yiu

Hong Kong’s stock market is expected to rank third, and Shanghai fourth, in global IPO market rankings for the first half this year, according to latest analysis by Deloitte China's National Public Offering Group. Both markets have been hit hard by macroeconomic turbulence caused by the US-China trade war as well as political uncertainties.

The New York Stock Exchange (NYSE) and Nasdaq are expected to occupy the top two places with mega initial public offerings in the period under review, Deloitte said on Wednesday. Hong Kong lost its crown to New York and the Nasdaq in May.

The “Big Four” firm, however, reinforced its full-year forecast for about 200 listings in Hong Kong raising between HK$180 billion (US$23 billion) and HK$250 billion, as it believes many Chinese financial companies will raise funds in the special administrative region, including at least three mega listings in the third quarter that are expected to raise at least HK$7.8 billion each.

“These prospective issuers have diverse businesses, are prominent in their sectors and are the types of companies that are crucial to Hong Kong’s role as an international financial centre, and Asia’s international listings hub,” said Kinson Lau, leader for Southern China at Deloitte China's National Public Offering Group.

A mega listing by logistics real estate developer ESR Cayman, which was which was supposed to raise as much as US$1.24 billion this month in Hong Kong and Asia’s largest listing this year, would have helped the special administrative region’s cause.

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But ESR postponed the flotation last week citing escalating tensions related to Hong Kong’s controversial extradition bill and to the trade war between the United States and China.

Based on current information about listings set to debut this month, by the end of June 2019, Hong Kong is expected to record 76 IPOs raising a total of HK$69.5 billion, down from 101 last year. But the total funds raised are up 38 per cent from the HK$50.4 billion reported in the first half of 2018.

According to Deloitte, the NYSE ranked top in the first half with 17 companies raising HK$137.3 billion. Nasdaq, in second place, reported 70 companies had raised HK$98.1 billion. The NYSE benefited from the US$8.1 billion IPO by Uber, the world’s biggest ride-hailing company, whose shares debuted in May. Uber’s biggest rival, Lyft, raised US$2.5 billion on the Nasdaq in March. Shanghai saw 27 companies raising HK$38.1 billion.

SCMP Graphics

The London Stock Exchange is expected to rank fifth with 17 companies raising HK$34.4 billion, which Deloitte credited to the launch of the London-Shanghai connect this week. Huatai Securities, one of China’s largest brokerages, made its trading debut on the LSE on Monday as the first company to trade via the new link. Investors in the UK capital were able to buy and sell global depository receipts in Huatai, which raised US$1.54 billion through the flotation.

Bloomberg reported that New York-listed Chinese e-commerce giant Alibaba Group Holding had appointed China International Capital Corporation and Credit Suisse Group to lead a secondary listing in Hong Kong, which could raise as much as US$20 billion, according to people familiar with the matter.

The Hangzhou-based company, which owns the South China Morning Post, said it does not comment on market rumour, while Hong Kong Exchanges and Clearing (HKEX), which operates the Hong Kong stock exchange, Asia’s second-largest capital market, declined to comment.

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“We welcome the fact that high-growth companies continue to go public amid a tumbling stock market exacerbated by the US-China trade war and Brexit. They helped Hong Kong to a strong third place in the global IPO race despite other stock exchanges recording larger offerings,” said Edward Au, co-leader of the National Public Offering Group.

Au said an HKEX listings reform introduced in April 2018, which allows companies with dual-class shareholding structures and pre-revenue biotechnology companies to list, has attracted new IPOs.

“We saw more new economy and biotech IPOs in Hong Kong before and immediately after the new listings regime. This includes eight pre-revenue biotech IPOs and two mega IPOs with weighted voting rights structures. The market so far seems receptive to pre-revenue biotech and life science and health care listings, and other potential candidates from these sectors could debut this year. We look forward to more changes in the traditional investment make-up of Hong Kong’s stock market, and its development into a full-fledged biotech hub and fundraising centre,” Au said.

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