The technology, media and telecoms (TMT) sector is set to boost the Hong Kong IPO market. Several mega-sized deals are expected to raise over HKD100 billion in the second half of 2018, increasing the full year fundraising to HKD250 billion, KPMG forecasts.
The number of Main Board IPOs in 2018 H1 will increase to 48 from 33 a year ago, although total fundraising will decline 11 percent to HKD 46.8 billion as a result of a decline in average deal size to HKD 980 million from HKD1.58 billion, according to KPMG analysis. The GEM is poised to end 2018 H1 with HKD 3.4 billion – a year-on-year increase of 31 percent.
Maggie Lee, Head of Capital Markets Development Group, Hong Kong, KPMG China, says: “The implementation of new listing rules for emerging and innovative companies has driven market sentiment and attracted the attention of companies which were previously seeking US listings. We anticipate at least 10 biotech companies to apply for Hong Kong IPOs by the year-end. In addition, a number of TMT firms are also eyeing large Hong Kong listings.”
With more IPOs in the pipeline, KPMG forecasts Hong Kong to record total fundraising of HKD250 billion in 2018 and ending the year among the top three IPO destinations globally.
The A-share IPO market, meanwhile has experienced a slowdown in terms of both the number of listings and total fundraising in 2018 H1 due to a drop in listing approvals. The Shanghai and Shenzhen stock exchanges are expected to raise a combined RMB 93.4 billion with 64 new listings, which is 26 percent less than the RMB125.4 billion (246 IPOs) recorded in 2017 H1. In spite of the decline in total fundraising, the average deal size of A-share IPOs is poised to triple to RMB 1.46 billion from RMB 510 million.
Louis Lau, Partner, Capital Markets Advisory Group, KPMG China, says: “New economy companies will be the key focus for the rest of 2018. The introduction of Chinese Depository Receipts (CDRs) offer a convenient channel for overseas- incorporated Chinese technology companies to return to A-shares, providing a significant boost to the market. The regulators are expected to take a gradual approach in the development of a sophisticated multi-tiered capital markets.”
As at 14 June 2018, the number of A-share IPO applicants was 300, down from the 363 recorded at the end of 2018 Q1.
Lau concludes: “The regulators’ focus on quality-over-quantity and A-shares’ MSCI inclusion will continue to be a key market focus for the rest of the year.”
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In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG China was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong office can trace its origins to 1945. This early commitment to the China market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in the Chinese member firm’s appointment by some of China’s most prestigious companies.