The IPO markets in Hong Kong and China are well supported to continue to perform vibrantly in the rest of 2021, thanks to the ample liquidity from various monetary and economic easing measures in the world to dissipate the negative impact brought by the ongoing pandemic, said Deloitte China recently when releasing an outlook report.
High-growth, new economy companies will still be the most well-received investments given their important roles demonstrated during the pandemic, the firm noted.
But, in general, as investors deepen their understanding about the new economy businesses, their valuations are expected to return to a more reasonable level, Deloitte China added.
The ongoing reforms in the listing regimes and capital markets, including enhancements to the listing regime for overseas issuers, the potential launch of listings of special purpose acquisition companies (SPACs), the revamp of Hang Seng Index constituents, the merging of Main Board and Small and Medium Enterprise Board in Shenzhen, enhancements to the Shanghai-Hong Kong Stock Connect, and pilot registration-based regimes for ChiNext and SSE STAR Market will improve fundraising opportunities and the listing environment for fast-growing technology businesses in particular, the firm pointed out.
Report highlights
- Nasdaq has taken over the global IPO leadership in terms of number of IPOs and funds raised in Q1 2021 at the boost of positive market sentiment over the US economic outlook, listings of health care, pharmaceutical and biotech companies, and three mega listings.
- The Hong Kong Stock Exchange came second with its three jumbo deals, followed by the New York Stock Exchange and London Stock Exchange, the report states, adding that The Shanghai Stock Exchange took 5th place.
- As at Mar 31, 2021, Hong Kong recorded 32 new listings, raising in all about HK$132.8 billion (US$17 billion), a record high in terms of IPO funds raised in the first quarter over past years.
- This indicates a 14% fall in number of IPOs, but an 842% surge in proceeds against 37 IPOs raising HK$14.1 billion (US$1.8 billion) in Q1 2020.
- Nearly 70% of funds raised in Q1 2021 came from three very large IPOs with weighted voting right (WVR) structures. Two of them were secondary listings.
- In Q1 2021, the Chinese Mainland recorded 100 IPOs raising RMB76.1 billion (US$11.6 billion) in total against 51 new listings raising RMB78.1 billion (US$11.9 billion) in Q1 2020.
- While the number of new listing rose 96%, the proceeds dropped by 3%. Shanghai continued to lead Shenzhen in both number of IPOs and funds raised.
- Shanghai saw 57 new listings in total having raised RMB52.4 billion (US$7.9 billion), while Shenzhen reported 43 IPOs and RMB23.7 billion (US$3.6 billion) in fund raised.
The heating wave of Hong Kong's IPO market in 2020 continued and hit a new record with its funds raised in Q1 2021, benefitting from a strong support from new economy IPOs which contributed nearly 90% of these funds, said Edward Au, Southern Region managing partner, Deloitte China.
“This shows that investment appetite is transforming and that there is continuous enthusiasm among China concept stocks to list in Hong Kong so as to divert their fundraising platforms into more capital markets,” Au noted. “Hong Kong's success as an international financial center, in particular in luring and retaining inflowing capital, is well recognised among businesses and funds.”
Deloitte China maintains its forecast for Hong Kong IPO market in 2021.
That represents about 120-130 IPOs in 2021 raising more than HK$400 billion (US$51.4 billion), the firm said.
This is backed by economic easing measures bracing strong liquidity to seek high return in the market through investment funds and vehicles, also the continuous wave of secondary listings of China concept stocks in the US, and listings of new economy companies, including those in the biotech sector, the firm added.
