Hong Kong IPOs shrink as investors back rival market

New listings of shares in Hong Kong have fallen this year, making it an outlier in global markets as concerns persist about the outlook for China’s tech sector after Beijing impede the sale of shares abroad.

Initial public offerings in Hong Kong have raised less than $26 billion this year, down 10% from 12 months ago and a fifth less than 2020 totals, according to data from Dealogic. For comparison, global IPO fundraising jumped 75% of last year’s total, with deals in New York alone growing to about $300 billion.

Bank staff have Hong Kong is expected to benefit from China’s control of technology companies, which began shortly after ride-hailing group Didi Chuxing listed in the US in June and was initially expected to focus on New York.

But a lack of clarity from Beijing about plans for a new approval mechanism for overseas listings has hampered efforts to redirect flows from Wall Street to the Asian financial hub.

The drop in listings in Hong Kong after a record first half of the year reflects the extent to which the market relies on a steady stream of IPOs from Chinese tech conglomerates, which have hobbled by uncertainty on how and when startups can be approved to sell shares abroad.

“This year has been marked by regulatory uncertainty and periods of greater market volatility globally,” said Jason Elder, a partner at law firm Mayer Brown in Hong Kong. a partner at law firm Mayer Brown in Hong Kong, added that investors and issuers are still waiting for Chinese regulators to provide details on how NS regulations on approving IPOs abroad will work.

Hong Kong has long marketed itself as the main listing hub for Chinese companies to raise capital overseas and has redoubled these efforts as their New York IPOs halted and when China focuses on expand its own capital market.

Eddie Yue, chief executive officer of the Hong Kong Monetary Authority, said the number of international investors using Hong Kong to access the mainland capital markets and vice versa, is increasing significantly. “We are part of China but we are also an integral part of the international financial system,” he told the Financial Times Global Banking Summit this week.

More than half of the Chinese companies pursuing an IPO in New York by Goldman Sachs are considering moving their listings to Hong Kong, according to a senior bank executive.

But hopes that deal flows could still increase were tempered on Thursday as shares of Cloud Village, the music streaming platform controlled by tech conglomerate NetEase, fell 2.5% on its first day. transaction first. IPO has been plan for August but was delayed as the crackdown on the technology intensified, with the deal target cut from about $1 billion to $500 billion.

Despite only ultimately raising $422 million, Cloud Village remains Hong Kong’s biggest IPO in months. It has been seen as a highlight for Chinese tech listings in Hong Kong.

“Stock prices are always a good storyteller,” said Dickie Wong, head of research at Kingston Securities. He added that backers including parent NetEase, Sony Music and Orbis have committed to buy $350 million in stock as background investors, meaning the deal has raised just $72 million. la from outside investors. “Whether it’s domestic or international institutional investors, they simply aren’t interested in this company.”

Hong Kong stocks offer more widely lived poorly in the weeks and months after market launch. Dealogic data shows that 80% of the city’s 73 IPOs this year are trading below the issue price, down an average of 15% since listing.

The suspension of virtually all overseas IPOs of Chinese companies with considerable amount of user data, imposed by Beijing in July over national security concerns, has also stymied Chinese IPOs in the US.

But overall equity financing in New York has skyrocketed this year as issuance has skyrocketed from special purpose acquisition company.

By comparison, the Hong Kong Exchanges and Clearing House has only completed consultations on proposals to allow Spac to list and has yet to publish its conclusions, although previous guidance indicated a more restrictive regimes than companies in the same industry.

Traders and brokers also warn that Hong Kong faces stiff competition from exchanges in Shanghai and Shenzhen, where this year’s fundraising has been 8% higher than the total. last year, at $61.5 billion.

“HKEX is not a complete monopoly,” said Wong at Kingston Securities. “It’s just one of the Chinese exchanges.”