Hong Kong has recorded its busiest week for new IPO launches in almost two years with deals opened to raise up to $1.3 billion, giving bankers and investors confidence the two-year share sale freeze could be easing.
Bankers and lawyers think China’s recent policy stimulus has opened the way for new IPOs but warned those new deals have to trade well in the secondary market to totally ease investors concerns.
Chinese autonomous driving firm Horizon Robotics began book building on Tuesday to raise up to $696 million and is due to set the final price of its shares on Monday, ahead of starting trade in Hong Kong next Thursday.
At that size, Horizon Robotics will be the largest IPO this year, slightly ahead of China Resources Beverage which has raised $650 million after pricing the offering at the top end of the price range on Friday.
The two deals launched this week, to raise up to nearly $1.3 billion, is the busiest week in Hong Kong IPOs since the week of Oct. 3 in 2022, according to Dealogic data.
China’s massive stimulus package, designed to boost domestic consumption and revive its flatlining economy, has prompted a 10% rally in Hong Kong’s Hang Seng Index since prior to the first stimulus measures being made public in late September.
“This more positive sentiment has meant there has been a pick-up in ECM activity,” Sunil Dhupelia, JPMorgan’s co-head of equity capital markets for Asia.
“We feel positive about the outlook for 2025 and beyond and the amount of dialogue around who could come to market for the rest of this year and into the next is clearly picking up.”
Hong Kong IPO volumes have fallen to their lowest levels in two decades so far in 2024, Dealogic data showed, as China’s regulators remain slow to approve companies’ offshore capital raising plans.
Ongoing tensions between China and the U.S and high interest rates during 202 has contributed to overseas investors paring back their exposure to China. But companies interest in raising capital and listing has picked up since the stimulus measures were announced, dealmakers said.
“We have seen increased dialogue and activity levels across ECM products, including blocks, convertible bonds and IPO, which could lead to a busy fourth quarter, in particular for Hong Kong and China,” said Saurabh Dinakar, co-head of Asia Pacific global capital markets at Morgan Stanley.
Improvement on investors sentiment also hinges on the stock performance of Chinese IPOs, bankers and lawyers said.
Offshore share offering plans of at least three Chinese bubble tea makers have been put on hold by the securities regulator due to the dour market performance of peers in Hong Kong amid weaker consumer sentiment at home, Reuters reported last month.
“The market sentiments have warmed up a bit and we have also seen increasing IPO pipeline movements,” said Weiheng Chen, senior partner and head of Greater China at law firm Wilson Sonsini.
“But the IPO performance remains mixed and many investors remain cautious. The market is still in the observing mode to assess the implementation effects of the recently announced stimulus measures.”
The share price of Alibaba-backed Qiniu dropped as much as 58% from its IPO price on its trading debut in Hong Kong on Wednesday.
Reuters