Hong Kong eyed as 2016's largest IPO market globally

2016 is Hong Kong's year.

Having backed by a number of large share flotations from Chinese financial services institutions, Hong Kong is expected to maintain its leadership in the global initial public offering (IPO) fundraising ranking towards the end of third quarter of 2016.

According to a release from Deloitte, this finding is based on the latest review and outlook analysis of the IPO markets of Hong Kong and the Chinese Mainland conducted by the National Public Offering Group of Deloitte China. Without any prominent new listings, stock exchanges in Shanghai and Shenzhen are to follow that in New York.

Hong Kong's IPO momentum is expected to be braced capital inflows after the Reminibi is added into IMF's Special Drawing Right (SDR) basket, investment from Mainland's insurance companies into Shanghai-HK Stock Connect, the U.S. interest rate hike expectation stabilizes. IPO activities at Shanghai and Shenzhen, however, are anticipated to remain stable at efforts of the authorities to regulate the stock market. 

By 30 September 2016, Hong Kong would have seen 71 IPOs raising approximately HK$136.4 billion. Both figures are down by 1% and 13% respectively from 72 IPOs and HK$156.4 billion funds raised in the same three quarters of 2015. More than 80% of this year's funds raised were from Chinese financial services institutions, a significant jump from 49% of last year.

Here's more from Deloitte:

“The no-go decisions with U.S. interest rate hike in July and September helped excite the market and hurled some large offerings in July and thereafter. After months of concern over the downward pressure on the Chinese economy, the market was glad to see signs in August indicating that the Chinese economy is improving. These factors have created a stable listing window for a Chinese bank, which is potentially the largest IPO of the year,” said Mr. Edward Au, Co-Leader of the National Public Offering Group at Deloitte China.

At the same time, IPO performance in Shanghai and Shenzhen are expected to be weakened when compared with last year. By end of this third quarter, Shanghai and Shenzhen would have completed 120 IPOs together raising about RMB74.9 billion, 38% fewer in the number of new listings and 49% less in proceeds respectively from 192 IPOs raising RMB147.4 billion in the same period of last year.

“But the IPO market rebounded in the third quarter after six slow months from the beginning of the year. We are delighted to see a mega listing from a city commercial bank in August at last after none from the banking sector in China for many years. The new listing has encouraged three other similar banks to go public and more are expected to join them,” noted Mr. Anthony Wu, Leader of China A-Share Capital Market of the National Public Offering Group, Deloitte China.

In terms of the funds raised against other major stock exchanges, Hong Kong is expected to claim the top spot in the ranking after helping seven Chinese financial institutions to go public and raising the biggest share of funds in the market. New York is to fall behind with a significant gap and to be followed by Shanghai and Copenhagen. Despite the fact that Copenhagen completed the fewest number of IPOs, it has been  benefited from two huge offerings, thus has surpassed NASDAQ which is likely to take the fifth position this year in terms of funds raised.

In the last quarter, with in the pipeline another three to four jumbo IPOs, including a securities group and a pharmaceutical group, each targeting to raise at least HK$7.8 billion, Hong Kong is going to see its IPO leadership further cemented. A pipeline of over 150 IPO applications, many of small and medium offerings, also means that the IPO momentum will prevail especially after numerous favourable developments that attract inflow capital into the market. For these reasons, Deloitte maintains its forecast of 115 IPOs raising HK$200 billion for Hong Kong for the entire year of 2016.