KPMG maintains its full year IPO forecasts for Hong Kong at HK$125 billion (US$16 billion). IPO transactions are expected to continue to grow steadily with Mainland Chinese companies seen as the main growth driver, according to the firm's latest analysis.
Hong Kong's IPO fund raising in the first half of 2013 reached HK$39.5 billion (US$5 billion), up 27.8 percent from same time last year. The number of listings, however, dropped to 21 from 31 in the first half of 2012.
Paul Lau, Partner, KPMG China says: “Overall market sentiment will continue to be impacted by the progress of QE tapering by the US Federal Reserve. The recent credit tightening in the PRC and the authorities’ response to that will also impact the market.”
“The market is expected to remain volatile but there are a couple of factors favourable to the IPO market in Hong Kong such as the relaxation of the PRC regulatory requirements for H-share listing of PRC companies,” he added.
The China Securities Regulatory Commission (CSRC) has further relaxed the criteria, and simplified the examination and approval procedures for overseas share issuance and listing of enterprises in Mainland China. KPMG expects that a few privately-owned enterprises will obtain CSRC's approval under these new rules and will list in Hong Kong this year. These are expected to be mainly small to medium sized deals, with potentially a new wave of medium sized H share IPOs in the pipeline for 2014 due to the relaxation of the CSRC approval requirements.
At the same time, more stringent capital requirements for financial institutions and recent credit tightening may prompt more Chinese lenders to raise funds by launching IPO's in Hong Kong. However, a rise in the average P/E of the Hong Kong stock market from the current level of 10 times is required for such deals to emerge.
Mainland China’s continuous efforts to facilitate the internationalization of the RMB will encourage more Chinese enterprises to launch RMB IPOs in Hong Kong, KPMG analysis notes. Some RMB denominated IPO deals are expected in the second half of the year, however these are not expected to be major drivers of the current IPO market.
New listings in the second half of 2013 will be driven by companies from the consumer market industry, the financial services sector and the real estate industry, KPMG forecasts.
Lau concludes: “While in the first half of the year the New York Stock Exchange secured a comfortable lead in terms of IPO funds raised among global stock exchanges, we expect there will be a close race between the Hong Kong Stock Exchange (HKSE) and its competitors, like NASDAQ, Tokyo Stock Exchange and BM&F Bovespa from Brazil for the other top 3 spots in terms of IPO funds raised."
“For Hong Kong, we believe Chinese e-commerce company Alibaba is the true wild card. If the company launches an IPO this year, it would secure Hong Kong at least a first runner-up slot and may even help it regain the crown as the world's top IPO market in 2013.”