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Global consultancy PwC is expecting that total funds raised across 12 months of 2024 on the Hong Kong Stock Exchange (HKEX) will rebound and reach over HK$100 billion ($12.8 billion) with over 80 companies expected to list.
IPO fundraising slowed significantly through 2023 with total fundraising on the HKEX at HK$46.3 billion, a year-on-year decrease of 56%. In a press conference on January 9, BNP Paribas noted that Hong Kong had seen the largest number of share buybacks on record at $16.2 billion in 2023.
The healthcare/life science sector was the second largest sector, raising HK$9.4 billion with HK$4 billion contributed from seven pre-revenue biotech firms, according to KPMG.
The rival consultancy is also prediciting a much stronger performance for the Special Administrative Region (SAR) in 2024 with a prediction that the SAR will return to the top five global IPO rankings.
BNP Paribas also noted that Hong Kong had seen the largest number of share buybacks on record at $16.2 billion in 2023, in a press conference on January 9. Jason Lui, head of East Asia strategy, global markets, BNP Paribas, told FinanceAsia said this trend is set to continue in 2024 although it is hard to gauge exact amounts in advance given that Hong Kong companies are less transparent about potential buybacks.
Already this year, Guming Holdings, a Chinese milk tea chain store, and the Mixue Group, which has a franchise of ice cream and iced tea stores, applied for listings on the HKEX. Both companies, which are part of the multi-billion dollar bubble tea market, applied earlier this week on January 2.
Guming has appointed Goldman Sachs and UBS as overall coordinators while Zhengzhou-based Mixue, also known as Mixue Ice Cream & Tea, has appointed Bank of America, Goldman Sachs and UBS as its coordinators.
Mixue recently opened its first store in Hong Kong and has significant operations outside of China, including in many markets in Asia.
Optimism
After a torrid 12 months, there are several reasons for optimism, which will be a boost for new HKEX chief executive Bonnie Chan who takes up the role in May. Reforms such as GEM, also known as Chapter 18, which started on January 1, 2024, will also help.
“We are optimistic about Hong Kong's stock market this year. We expect three to five specialist technology companies will list in Hong Kong through Chapter 18C in 2024. Traditional sectors, including industrial and retail, should not be overlooked and are expected to continue to dominate," said Benson Wong, PwC Hong Kong entrepreneur group leader, said in a January 2, 2024, media release.
Wong added: “The influx of Chinese mainland companies establishing or expanding their presence in Hong Kong, coupled with the increasing demand from international funds to allocate into Rmb assets, means that there will be greater interconnection between the Hong Kong and Chinese mainland markets."
"The further expansion of Stock Connect will help promote Hong Kong as a centre for Rmb asset risk management and solidify its position as a global offshore Rmb business hub," Wong continued.
Adding to the the optimistic outlook, Louis Lau, partner, capital markets at KPMG China, said in a January 9 media release: “Consumer market companies remained a bright spot for Hong Kong [in 2023], recording the largest IPO in terms of proceeds for two consecutive years. The healthcare/life sciences sector was the second largest sector, raising HK$9.4 billion, with HK$4 billion contributed by seven pre-revenue biotech firms.”
A deal with a Saudi Arabia exhcnage-traded fund, a first for Asia Pacific, also helped the market last year. The listing of the ETF, the CSOP Saudi Arabia ETF, on the HKEX helps investors track the Saudi Arabian equities.
Lau added: “Hong Kong was also home to Asia’s first-ever Saudi Arabia exchange-traded fund, as the city further strengthens its cooperations with the Middle East. Hong Kong is expected to continue encouraging interconnectivity with the Middle East, which could lead to greater interest in the city’s capital market or potentially cross-border listings of Middle Eastern companies in Hong Kong. These developments will further fortify Hong Kong’s position as one of the premier international financial centres in the world.”
Irene Chu, partner, head of new economy and life sciences, Hong Kong, KPMG China, added in the release: "Despite the prevailing subdued market sentiments, the fundamentals of Hong Kong’s capital market remain robust and resilient. With investors shifting their attention towards technologies such as artificial intelligence, semiconductors and green technology, Hong Kong is well positioned to spark a recovery in its IPO activity by embracing these growing trends.”
For more FinanceAsia commentary on the state of the market in Hong Kong see here.
