Initial Hong Kong public offerings have raised less than $ 26 billion this year, down 10% from 12 months ago and more than a fifth lower than the 2020 total, according to Dealogic data . By comparison, global IPO fundraising has jumped 75% from last year’s total, with deals in New York alone reaching around $ 300 billion.
Bankers expected Hong Kong to profit from China’s regulatory crackdown on tech companies, which began immediately after the US listing of ride-sharing group Didi Chuxing in June and was initially expected to focus on New York.
But a lack of clarity from Beijing on plans for a new approval regime for offshore listings has hampered efforts to divert flotation from Wall Street to the Asian financial hub.
Didi announced on Friday that he would withdraw from the New York Stock Exchange after Beijing investigated the company over data security concerns. While Didi has said he plans to go public in Hong Kong instead, the investigation and his sudden delisting from Wall Street just months after its IPO added to the uncertainty.
The drop in listings in Hong Kong after a record first half reflects how reliant the market is on a steady stream of IPOs from Chinese tech groups, which have been hampered by concerns about how and when start-ups will be able to obtain authorization to sell. actions abroad.
“This year has been marked by regulatory uncertainty and periods of greater market volatility globally,” said Jason Elder, partner at Mayer Brown law firm in Hong Kong, adding that investors and Issuers were still waiting for Chinese regulators to provide details on how the regulations for offshore IPO approvals will work.
Hong Kong has long touted itself as the premier listing center for Chinese companies raising capital overseas and has stepped up efforts as these groups’ IPOs in New York halt and China focused on expanding its own capital markets.
Eddie Yue, managing director of the Hong Kong Monetary Authority, said the number of international investors using Hong Kong to access the mainland’s capital markets, and vice versa, was increasing dramatically. “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 Goldman Sachs’ pipeline of Chinese companies seeking IPOs in New York are considering moving their listings to Hong Kong, according to a senior bank official.
But hopes that the deal flow could pick up again were shaken on Thursday as shares in Cloud Village, the music streaming platform controlled by tech group NetEase, fell 2.5% on the first day of trading. . The IPO was slated for August, but was delayed as the tech crackdown intensified, with the deal’s target rising from around $ 1 billion to $ 500 billion.
Although it ultimately only raised $ 422 million, Cloud Village was still Hong Kong’s biggest IPO in months. It had been seen as an indicator for Chinese tech listings in Hong Kong.
“The stock price is always a good storyteller,” said Dickie Wong, head of research at Kingston Securities. He added that backers, including parent company NetEase, Sony Music and Orbis, had pledged to buy $ 350 million in shares as core investors, meaning the deal didn’t only managed to raise $ 72 million from outside investors. “Whether they were local or international institutional investors, they just weren’t interested in this business.
Hong Kong stock offerings more generally have performed poorly in the weeks and months after entering the market. Dealogic data showed that 80 percent of the city’s 73 IPOs this year are trading below their issue price, falling 15 percent on average since listing.
The halt of virtually all offshore IPOs by Chinese companies with substantial amounts of user data, imposed by Beijing in July due to national security concerns, has also limited Chinese IPOs in the United States. .
But global fundraising in New York City has exploded this year due to an increase in issuance from special purpose acquisition companies.
By comparison, Hong Kong Exchanges and Clearing only recently completed a consultation on proposals to allow Spac listings and has yet to announce its findings, although earlier guidelines indicated a more restrictive regime than its peers.
Traders and brokers have also warned that Hong Kong faces stiff competition from the stock exchanges in Shanghai and Shenzhen, where fundraising this year is already 8% higher than last year’s total, compared to $ 61.5 billion.
“HKEX is not a total monopoly,” Wong said at Kingston Securities. “This is just one of the Chinese exchanges. “