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Hong Kong’s preliminary public itemizing market stays in a slump, at the same time as analysts predicted a market rebound in the second half of the yr.
“The Hong Kong market has not recovered as a lot as we want,” Irene Chu, companion at KPMG China, informed CNBC.
In the primary three quarters of the yr, the Hong Kong IPO market concluded 44 listings, and raised 24.6 billion Hong Kong {dollars} ($3.14 billion), in line with KPMG. It represented a drop of 65% in deal depend and 15% in proceeds respectively in comparison with the identical interval final yr, the agency stated.
Hong Kong’s inventory market was among the many worst performing final yr, shedding 15% in 2022 for its third-straight yr of declines. In October, the Hang Seng Index and Hang Seng Tech Index fell to their lowest ranges since November 2022.
The common sentiment has not but recovered. We can’t anticipate the IPO market to rebound shortly or be comparable with the great previous days.
Ringo Choi
Asia-Pacific IPO chief, EY
“The Hong Kong market is already at [a] very low level [compared to] the great previous days in 2020 or earlier than that. So the overall sentiment has not but recovered. We can’t anticipate the IPO market to rebound shortly or be comparable with the great previous days,” stated Ringo Choi, Asia-Pacific IPO chief at EY.
A June report by EY and a mid-year review released by KPMG China predicted the Hong Kong IPO market may rebound in the second half of 2023.
On Oct. 27, the market debut of J&T Express, a Tencent-backed Indonesian logistics service supplier, put up a lackluster efficiency. Shares opened flat and subsequently ended 1.33% decrease.
J&T, the second largest itemizing in Hong Kong this yr, had initially expected to lift at the very least $1 billion in the itemizing however lower the goal by half on the again of weak investor sentiment, in line with Reuters.
“The Hong Kong inventory market remained weak in Q3 2023, as did inventory valuations, due to macroeconomic developments, in specific round U.S. rate of interest hikes. Many IPO candidates proceed to wait-and-see for a turnaround in market valuations whereas making ready and planning their choices,” stated Deloitte in a September report.
Hong Kong’s greatest IPO this yr, Chinese liquor maker ZJLD Group, plummeted 18% in its trading debut on April 27.
The two largest IPOs in the Asian monetary hub final yr additionally slumped in their itemizing debuts. Chinese electrical automobile maker Zhejiang Leapmotor dived 34%, whereas property providers supplier Onewo fell virtually 7%.
“Five of the final 9 massive HKEx IPOs had flat debuts. At the final shut costs, all the big HKEx IPOs since 2022 are buying and selling beneath the IPO costs,” stated Arun George, co-founder and analyst at Global Equity Research in a Oct. 26 report published on Smartkarma, an funding analysis community.
Weak Greater China restoration
Hong Kong is a particular administrative area of China, which has confronted a disappointing post-Covid financial restoration. In October, the International Monetary Fund lowered its growth forecast for China to five% this yr and 4.2% in 2024.
The inventory exchanges of Shanghai and Shenzhen raised $28.7 billion and $19.8 billion in funds respectively from January to Oct. 9, dropping 42% and 23% in comparison with the primary three quarters of final yr, KPMG reported.
But analysts say the worldwide financial system outdoors of China is struggling to recuperate. “It’s not simply China. The restoration of the worldwide financial system is additionally fairly difficult. Overall financial restoration takes a little bit of time to actually choose up,” stated Chu of KPMG China.
In the primary three quarters of this yr, there have been 968 IPOs globally, which raised $101.2 billion in capital —a 5% and 32% lower year-over-year respectively, stated EY.
In a bid to bolster the market, the Hong Kong Stock Exchange in September proposed measures to reinforce the attraction for small- and medium-sized enterprises with high-growth potential to record.
In August, the government announced a task force to “improve” inventory market liquidity in order to bolster the event of its capital market.
“The dynamic initiatives, coupled with HKEX’s steady enchancment of its itemizing regime, are essential to strengthening Hong Kong’s various and multi-layered capital markets, a key to sustaining the competitiveness of Hong Kong as a premier worldwide monetary centre,” stated KPMG.