Hong Kong leads the world in floats

China Daily (Hong Kong) - - MARKETS | BUSINESS - By DUAN TING in Hong Kong tingduan@chi­nadai­lyhk.com

The Hong Kong stock ex­change is ex­pected to keep its world No 1 stand­ing in ini­tial pub­lic of­fer­ings in 2016, fol­lowed by Shang­hai in sec­ond place, ac­cord­ing to KPMG, an in­ter­na­tional au­dit­ing and ad­vi­sory com­pany.

Louis Lau, part­ner of the cap­i­tal mar­kets ad­vi­sory group at KPMG, said he ex­pects Hong Kong’s IPO mar­ket to re­main steady in 2017 and to con­tinue be­ing one of the world’s top IPO venues.

Hong Kong led the world in IPOs even though its vol­ume ac­tu­ally fell around 26 per­cent from 2015 due to un­cer­tainty in the macroe­co­nomic en­vi­ron­ment, when most cur­ren­cies de­clined against the US dol­lar, Lau said.

The num­ber of “size­able deals” — those above HK$5 bil­lion ($644 mil­lion) — de­creased but more small and medium-sized en­ter­prises from the Chi­nese main­land and other coun­tries continued to seek list­ings in Hong Kong.

About HK$195 bil­lion were raised through IPOs in 2016, com­pared with HK$263 bil­lion in 2015. This was the low­est level in three years. The top five IPOs raised HK$108.9 bil­lion, rep­re­sent­ing over half of the ex­pected to­tal funds raised in 2016, ac­cord­ing to KPMG. The com­pany also fore­casts that the num­ber of IPOs is ex­pected to reach 120 in the full year of 2016 and that the level in 2017 will be ap­prox­i­mately the same.

Most funds were raised by com­pa­nies in the fi­nan­cial ser­vices sec­tor, in­clud­ing banks, se­cu­ri­ties and leas­ing com­pa­nies, ac­cord­ing to KPMG. Nine out of the top 10 Hong Kong IPOs in 2016 were from the fi­nan­cial ser­vices sec­tor, amount­ing to nearly 70 per­cent of the funds raised, up from 54 per­cent last year.

Health­care, life sciences and the TMT sec­tors also oc­cupy no­tice­able po­si­tions in the Hong Kong IPO mar­ket.

In the main­land IPO mar­ket, ap­prox­i­mately 230 IPOs are ex­pected by 2016-end, rais­ing ap­prox­i­mately 155 bil­lion yuan ($22.3 bil­lion), a com­pa­ra­ble level with last year.

bil­lion

funds raised through Hong Kong IPOs this year

In the Chi­nese main­land, mean­while, around 700 com­pa­nies are queu­ing to list and an ac­cel­er­a­tion of IPO ap­provals and the grad­ual es­tab­lish­ment of mul­ti­tiered cap­i­tal mar­kets are ex­pected to help speed up the process.

Lau said that Hong Kong’s IPO pipeline re­mains healthy, with an in­creas­ing num­ber of IPO ap­pli­ca­tions. The launch of the Shen­zhenHong Kong stock con­nect and other up­com­ing ini­tia­tives to con­nect the Chi­nese main­land and Hong Kong cap­i­tal mar­kets will boost mar­ket liq­uid­ity in the longer term.

Ringo Choi, man­ag­ing part­ner for China South and Asia-Pa­cific IPO leader at EY, reck­oned the Shen­zhenHong Kong link and the po­ten­tial IPO con­nect will lure more in­vestors to buy H shares, thus boost­ing liq­uid­ity, but the im­pact on the Hong Kong IPO mar­ket will be lim­ited. He ex­plained that the vi­tal­ity of the IPO mar­ket re­lies mostly on val­u­a­tion and liq­uid­ity in the sec­ondary cap­i­tal mar­ket.

Choi said that the mar­ket is ex­pect­ing a large main­land fi­nan­cial tech­nol­ogy firm to launch its IPO next year.

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