Hong Kong returned to being one of the top three listing hubs globally in 2013 in terms of funds raised, due to improving economic performance and market sentiment. PwC expects this trend to continue in 2014. It forecasts that total funds raised through IPOs in Hong Kong this year will exceed HK$250 billion.
In 2013 funds raised through IPOs in Hong Kong stood at HK$169 billion – 88% more than in 2012 (HK$89.8 billion). The number of IPOs totalled 112, up 75% on the year before. Among these, 89 were listed on the Main Board (2012=52).
Excluding transfers from the Growth Enterprise Market (GEM) to the Main Board (8 companies), there were 62 and 104 new listings in 2012 and 2013 respectively. Five companies were listed on the Main Board by introduction (without funds being raised), and the number of new GEM listings increased to 23 in 2013, almost double 2012.
Benson Wong, PwC Hong Kong Assurance Partner says the Hong Kong IPO market livened up in the second half of 2013, and especially in the fourth quarter.
"Market uncertainties were being eliminated gradually and this favoured IPO pricing. There were also adequate funds in the market, so many companies resumed or accelerated their listing plans. This shows the improvement in people’s confidence, as well as the efficiency and dexterity of the market itself, which helps companies and investors catch the best fundraising opportunities,” says Wong.
PwC is expecting 100 new IPOs to list in Hong Kong this year, with 80 on the Main Board and 20 on the GEM. With improving market conditions, there will be more mega-IPOs compared to 2013, which could help total funds raised exceed HK$250 billion this year.
“After years of integration and collaboration with Mainland bourses, coupled with development in its own right, the Hong Kong market has become one of the best listing platforms for Mainland and overseas companies," says Edmond Chan, PwC Capital Market Services Group Partner. "More Mainland companies from different sectors are considering IPOs through the Hong Kong Stock Exchange. I believe the trend could continue and make Hong Kong a more comprehensive fundraising platform.”
As market sentiment improves, PwC expects that there will be more small to medium sized companies with principal operations in China coming to Hong Kong for IPOs. "All these help to put Hong Kong capital markets in the same league as New York or London in terms of funds raised,” notes Chan.
As Mainland authorities have announced an orderly resumption of A-share IPOs, PwC expects this will re-activate the A-share market and facilitate fund raising for Mainland SMEs, relative to what they have experienced in the past. It is also expected that the pace of IPO issuance will accelerate. PwC forecasts more than 300 new IPOs in the A-share market this year. Total funds raised could reach RMB$250 billion.
Meanwhile, the Federal Reserve is about to start reducing its massive quantitative easing programme. It is a sign that the US and world economies are on the right track to recovery.
“It is inevitable that QE withdrawal will bring short-term fluctuations to the market, but it will also have a positive long-term impact on the economy and global stock markets. As the market steadily improves it will enable companies to raise funds through IPOs or spin-offs. Given the improving market conditions, PwC believes more overseas companies will consider listing in Hong Kong, thus further developing the city as a major fundraising platform in the region,” says Chan.
In terms of the types of companies making IPOs, PwC expects to see more retail and consumer goods businesses and Mainland financial institutions. Industrial and technology-related companies are also recognising Hong Kong as an ideal location for a public listing.