Affected by the uncertainties in the global economy, the Hong Kong IPO market failed to maintain the number one listing hub in 2012 in terms of funds raised. However, despite the challenges and fewer number of large-sized IPOs, Hong Kong remains one of the leading global IPO destinations.
PwC forecasts the total funds raised through IPOs in Hong Kong this year to be in the range of HK$120-150 billion.
In 2012, the total funds raised through IPOs in Hong Kong was HK$89.8 billion, which is over 65% less than in 2011 (HK$272.3 billion). The number of newly listed companies totaled 64, down nearly 40% compared to the year before.
Among the 64 listed companies, 52 were on the Main Board (2011:89) including 48 newly listed companies with funds raised (2011:69), 2 listing by introduction (2011:8) and 2 transfers of listing from the GEM Board to the Main Board (2011:12). Twelve turned to the GEM Board to raise funds in 2012 (2011:13).
Excluding the transfer of listings from the GEM Board to the Main Board, the number of IPOs totaled 62 last year, a decrease of 31% from 90 in 2011.
"Corporate performance has been affected by the continuous uncertainties of the global economy," says Benson Wong, PwC Hong Kong Assurance Partner. "Investor interest for IPOs slightly cooled. This made the performance of the IPO market in 2012 less encouraging than that in previous years. But there is no doubt some companies qualified for listing are waiting for a better market sentiment."
Wong adds that once pricing has improved, these companies will immediately re-commence their listing plans.
This is evidenced by the increase in new listings at the end of the year. The IPO market is tipped to build momentum.
In 2012, the Hong Kong IPO market was dominated by companies engaged in retail and consumer goods, industrial products, energy & mining related sectors and financial services. This reflects the fact that the Hong Kong capital market is an ideal platform for the listing of different types of companies, attracting local, Chinese and international investors.
Several overseas IPO markets were helped by mega IPOs. Excluding these mega IPOs, these exchanges have not yet returned to their pre-financial-crisis levels in terms of the listing of new IPOs.
"Given the current market condition and the numerous uncertain factors, it was impressive that Hong Kong managed to maintain its position as one of the leading listing hubs in terms of the amount of funds raised," notes Edmond Chan, PwC Capital Market Services Group Partner.
In fact, the fundraising activities of small and medium-sized enterprises have not greatly been affected.
"We expect more and more small and medium-sized enterprises to seek a listing in Hong Kong. Furthermore, international retail and consumer product brand names and energy & mining related companies are still keen to list in Hong Kong," says Chan. "It is worth noting that though the IPO market posted uneventful performance in 2012, the debt securities market achieved a favourable performance. Many corporations were in great need of capital, so they sought to raise funds by issuing debt securities."
As at 30 September 2012, the total funds raised through issuance of debt securities by private enterprises in the Hong Kong Stock Exchange added up to HK$194.2 billion (2011 full year: HK$101.9 billion).
"We expect to see a continuous development of the debt securities market in 2013," says Chan.
The US has pushed forward another round of measures of quantitative easing while the investors with hot money continue seeking fund-raising opportunities.
With abundant funds in the Hong Kong capital market together with signs of China's improving economy since the fourth quarter of 2012, the Hong Kong IPO market has regained its momentum. PwC forecasts the equities markets in Hong Kong and mainland China will benefit from these improving conditions.
PwC is expecting 80 new IPOs to list in Hong Kong this year, including 65 on the Main Board and 15 on the GEM Board. The total funds raised in 2013 are expected to be in the range of HK$120-150 billion, a significant growth compared to 2012.
"The 18th National Congress of the CPC has clearly stated that China will accelerate its economic development. And the world is bullish on the development of China’s economy in the medium and long term," says Chan.
PwC expects that more mainland based small and medium-sized enterprises will be listed in Hong Kong following the relaxation of listing requirements for H shares and the beginning of the conversion of B shares into H shares. More foreign enterprises will be encouraged to list in Hong Kong under the anticipated changes of secondary listing requirements.
"The Hong Kong IPO market is an ideal destination for enterprises to raise funds and global investors to seek opportunities as the market is highly-transparent, supported by a good track record, and is well regulated. We expect to see a more active IPO market in the second half of 2013 and major applicants will likely come from financial institutions, energy & mining related companies and retail & consumer products," adds Chan.
In the mainland China fundraising market, a total of RMB 38.3 billion (HK$ 47.5 billion) was raised through IPOs in Shanghai last year, compared to RMB 105.1 billion (HK$129.3 billion) in 2011, a decline of nearly 70%. While a total of RMB 70 billion (HK$ 87.1 billion) was raised on the Shenzhen Stock Exchange, a drop of nearly 60% from 2011 (RMB 181.0 billion, HK$ 222.7 billion).