KPMG downgrades Hong Kong’s 2024 IPO fundraise estimate to HK$60bn

Geopolitics, interest rates and investor appetite will continue to weigh on the city’s bourse, lagging US peers along its IPO recovery journey. Meanwhile, from September, traders will be able to trade during typhoons.

Global consulting firm KPMG anticipates that the total proceeds raised through initial public offerings (IPOs) on the Hong Kong Stock Exchange (HKEX) will be HK$60 billion ($7.7 billion) in 2024, said Louis Lau, capital markets partner at KPMG China.

This adjusted forecast almost halved a previous KPMG projection of HK$100 billion of IPO fundraising in 2024, released earlier this year.

Lau explained, at a June 18 media conference, that the divergence between two projections was mainly due to an expected outlook of multiple US Fed rate cuts and possible listings of large companies last year.

For example, Cainiao, the spun off logistics arm of Chinese tech giant Alibaba Group, filed for a listing on the Hong Kong bourse last September, before the whole plan was scrapped by Alibaba, with a valuation mismatch potentially being one of the reasons.

Up until June 13, 2024, the Hong Kong IPO market raised a total of HK$11.6 billion across 27 deals, marking a decrease by 35% and 15% in funds and deal volume compared to the first six months of 2023, according to the KPMG team.

Across completed IPOs in Hong Kong, companies from the technology, media and telecommunications (TMT), consumer markets and healthcare sectors led the market in terms of proceeds raised, recording HK$4.6 billion, HK$2.8 billion and HK$1.5 billion, respectively.

Irene Chu, partner, head of new economy and life sciences, Hong Kong, at KPMG China, cited the first listing under HKEX’s Chapter 18C as an example of improvement in the city’s stock market – artificial intelligence (AI)-powered new material and medicine discovery company, QuantumPharm, also known as XtalPi, debuted on the HKEX with a HK$989 million IPO last week. The shares jumped 10% on debut.

Chapter 18C is an additional series of listing rules effective since March 31, 2023, which aims to lower revenue thresholds for and encourage “specialist technology companies” to list on the HKEX.

Chu predicted that AI and cloud computing-related themes would continue to be a driver for both Hong Kong and global stock markets, as investors are increasingly interested in emerging technologies.

“For high-tech companies wishing to list under Chapter 18C, an important aspect is to demonstrate a clear commercialisation path with technologies such as AI. Investors would like to see applications at larger and deeper levels,” she said, replying to enquiries from FinanceAsia.

Investor appetite

Similarly, investor appetites remain key when it comes to the entire stock market, added Chu.

“There is never short of applicant companies waiting to be listed,” she said. “The question is whether they are attractive enough for regional and global investors.”

The number of active applicants for listing on the HKEX in 2024 has witnessed an increase, with the latest figure standing at 105 in the first half of June.

A complex geopolitical landscape, elections in multiple major markets, and high borrowing costs due to interest rates staying higher for longer, have weighed on global investors.

Global IPO markets raised a total of $51.6 billion in the first half of 2024, across 513 deals. Compared to the same period last year, an approximately 20% drop in both funds and deal volume was recorded.

Overall, IPO activity in key global markets have improved compared to the same period last year, while the Asia Pacific (Apac) region remained sluggish, said the KPMG team.

US stock exchanges took the lead, with the New York Stock Exchange (NYSE) and Nasdaq ranking the top two in terms of IPO proceeds in the first half, raising $10.8 billion and $6.8 billion, respectively.

The National Stock Exchange of India followed at $3.9 billion, with Shanghai and Shenzhen bourses ranking fourth and fifth. HKEX is expected to be tenth.

Shanghai and Shenzhen stock exchanges, or commonly known as A-share stock exchanges, collectively raised Rmb56.5 billion ($7.79 billion) across 52 deals, marking a decrease of approximately 75% and 70% in funds and deal volume, compared with 2023.

The China Securities Regulatory Commission (CSRC), while on the one hand wants to prioritise quality over deal volume onshore, on the other, issued five supportive measures late April to enhance connectivity between Hong Kong and the mainland securities markets, including boosting Stock Connect.

In another move for the HKEX, John Lee, Hong Kong’s chief executive, announced on June 18 that the HKEX will stop its usual practice of trade suspension during typhoon weathers from September 23, meaning that trades on the Hong Kong bourse will not be halted even if a No.8 typhoon signal (the third strongest) is issued by the Observatory. 

In a June 18 announcement, the HKEX said that people would be strongly encouraged to work from home during severe weather. HKEX said that its trading, clearing, settlement and market data systems will be fully accessible via remote networks during severe weather conditions. 

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