There is a good chance for full year IPO proceeds in Hong Kong to exceed last year’s HK$169 billion (US$21.8 billion), given the strong performance in the first half, says KPMG.
However, relatively weak reception for a number of planned mega IPOs has impacted overall sentiment.
Excluding listings by introduction or transfers from the Growth Enterprise Market (GEM) to the Main Board, there were 24 IPOs in the second quarter of 2014, bringing the total in the first half to 44, with proceeds of HKD80.8 billion.
In comparison, for the first half of 2013, 21 IPOs raised a total of HKD39.7 billion.
More entities were listed before the end of the second quarter because the IPO pipeline saw a build up prior to the new public disclosure requirements, effective on 1 April 2014.
Sixteen out of the 24 IPOs occurred in the month of June.
"We expect to see the remaining pipeline will provide market momentum in the second half of 2014, particularly in July, with over 20 companies expected to list this month,” says Rebecca Chan, Partner and Head of Hong Kong Capital Markets, KPMG China.
Despite the increased number of IPOs in the second quarter compared to the first three months of 2014, overall market sentiment was weak due to sluggish investor demand and market uncertainties, particularly for the mega IPOs.
In the second quarter, seven out of the 23 Main Board IPOs were under-subscribed in the retail portion and, interestingly, all of these IPOs were seeking to raise above HKD1 billion.
"Such weak market demand for relatively large-sized IPOs may prompt potential applicants to take a wait-and-see approach for the rest of 2014,” says Louis Lau, Partner, KPMG China.
KPMG expects non-bank financial services, in particular micro and small loan companies to be a focus for IPOs.
Though KPMG does not expect the number of deals and IPO proceeds from this sector to outweigh other sectors in the short run, it has relatively high growth potential and is expected to attract more market attention compared to traditional entities.
Separately, the upcoming Shanghai-Hong Kong Stock Connect – to establish mutual stock market access between Mainland China and Hong Kong – will boost the flow of funds between the two markets.
The overall performance in 2014 will depend on the fourth quarter, the traditional peak season for Hong Kong listings.