Hong Kong is on track for 100 IPOs worth HKD200 billion in 2016, retaining its position as one of the world's top performing locations for new share sales this year, forecasts KPMG China. This is despite having seen a significant decline in IPO proceeds in the first half of 2016 compared to the same time last year.
Excluding listings by introduction and transfers from the Growth Enterprise Market (GEM) to the Main Board, Hong Kong recorded 38 IPOs in the first half of 2016, down from 45 IPOs in the same time period last year, when IPO proceeds dropped by two-third to HKD43 billion from HKD130 billion. The city’s exchange however continues to maintain its status as the largest IPO market in the world - in terms of the amount of funds raised.
Maggie Lee, Partner, Head of Capital Markets Development Group, Hong Kong, KPMG China, says: “In spite of market volatility, Hong Kong’s IPO pipeline remains healthy with a number of sizeable deals expected to be completed in the second half of 2016.”
As at 30 June, there are around 120 active listing applications, KPMG China notes.
Lee adds: “The Hong Kong IPO market is expected to remain as the exchange of choice for mainland companies seeking access to public equity financing and the number seeking to do so will likely increase as the trend towards deleveraging among mainland companies gathers pace. Several major listings from the financial services sector are expected to take place in the second half of this year.”
In the first half of 2016, three sizeable deals - with proceeds exceeding HKD5 billion each - from financial services sector were recorded, raising all together HKD31.5 billion, or 73 percent of the total IPO proceeds. In the first half of 2015, seven sizeable IPOs have raised HKD114.9 billion.
In China, the A-share IPO activities gradually picked up following the IPO resumption in November 2015. In the first half of 2016, there were a total of 26 and 35 new listings on the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZE) respectively. Total funds raised on the SSE and the SZE amounted to RMB13.4 billion and RMB15 billion respectively, which represents a decline of 87 per cent and 65 per cent from the corresponding period last year. The significant fall in IPO funds raised was the result of a reduced number of new listings and the absence of any sizeable IPOs in the first half of 2016.
Some policy measures including reforms to IPO subscriptions and segmentation of National Equities Exchange and Quotation (NEEQ) have already been finalised and were implemented in the first six months of 2016. China’s registration-based system is yet to be developed.
Louis Lau, Partner, Capital Markets Advisory Group, KPMG China, says: “Since it is expected that this system will only be implemented after various prerequisites are met including th establishment of a healthy multi-tier capital markets framework and changes to the country’s existing legal framework, it is unlikely that these reforms will be officially launched in the coming six months.”
“We expect China IPO activity over the next six months to continue at similar levels to what we saw in the first half of the year. In spite of the suspension of new listings between July and November 2015, the strong performance achieved in the first half of 2015 will be tough to beat. We foresee that the number of IPOs and funds raised for the entire year of 2016 will be significantly lower than 2015.”
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