Hong Kong is top IPO destination for 3 consecutive years

IPO market continues to be promising in 2012 as HK$230bn total funds raised through IPOs in Hong Kong is expected this year.

Hong Kong is once again the number one listing hub in 2011 in terms of the number of funds raised. Adding to that accolade, the Hong Kong bourse continued to be one of the leading IPO markets in the world in the past decade. PwC expects that trend to continue in 2012. PwC forecasts the total funds raised through IPOs in Hong Kong this year to be in between the range of HK$200-230 billion.

In 2011, the total funds raised through IPOs in Hong Kong were HK$271.4 billion, a figure that is 40% less than in 2010 (HK$449.5 billion). The number of IPOs totaled 102 last year, down 11% compared to the year before. Among the 102 companies that listed in 2011, 89 were on the Main Board (2010:107) including 69 newly listed companies with funds raised (2010:87), 8 listing by introduction (2010:8) and 12 transfers of listing from the GEM Board to the Main Board (2010:12). Thirteen turned to the GEM Board to raise funds in 2011 (2010:7). Excluding the transfer of listings from the GEM Board to the Main Board, the number of IPOs totaled 90 last year, a decrease of 12% from 102 in 2010, according to a PwS report.

“The Hong Kong IPO market was affected by external factors in 2011. The volatility in the overall global equities market dragged the Hang Seng Index down by 20% throughout the year. The P/E ratios of IPOs also had to be adjusted. However, the Hong Kong IPO market is still expected to be vibrant due to sufficient liquidity and the continuous growth of China’s economy. Although a few companies suspended their listing plans last year, we saw some successfully listings before the end of the year. As a whole, Hong Kong remains one of the hotspots for IPOs, drawing attention from global investors,” says Benson Wong, PwC Hong Kong Assurance Partner.

Nine foreign companies sought to raise funds in Hong Kong in 2011, testifying to the territory’s increasing importance and popularity as the listing destination of choice for multinational corporations.

“Global companies and luxury brands are increasingly looking to expand in the Asia Pacific region, especially China. To do so, these companies would need additional funds. And where better to tap the market for capital than Asia. Listing in the region is also a good way for these international companies to enhance their brand and image in markets where they’re not as well known,” Edmond Chan, PwC Capital Market Services Group Partner says. “The uniqueness of Hong Kong’s position makes the city an ideal platform for these global companies to meet with investors from China,” adds Edmond.

Over in China, a total of RMB 105.1 billion (HK$ 129.3 billion) was raised through IPOs in Shanghai last year , compared to RMB 189.2 billion (HK$223.2 billion) in 2010, a decline of 44%. While a total of RMB 181.0 billion (HK$ 222.7 billion) was raised on the Shenzhen Stock Exchange, a drop of 39.0% from 2010 (RMB 299.1 billion, HK$ 352.8 billion).

Due to market uncertainties, PwC is expecting 100 new IPOs to list in Hong Kong this year, including 90 on the Main Board and 10 on the GEM Board. The total funds raised in 2012 are expected to be in the range of HK$200-230 billion. Although Chinese companies are expected to remain the key drivers of new IPOs in Hong Kong, more international corporations especially luxury brands are expected to seek fund-raising opportunities in the territory.

“The Hong Kong IPO market is widely expected to be affected by external factors in 2012, whereby pricing is also likely to come under pressure. However, IPO activities in the city are forecast to pick up in the second half of the year. We foresee the retail and consumer goods sector, which has matured over the years, to be one of the main IPO drivers this year. Having said that, we can also expect to see more and more financial institutions such as city commercial banks, securities and finance companies, also industrials, mining and energy companies are increasingly recognising Hong Kong as an ideal location for a public listing. In essence, the Hong Kong IPO market will become more diversified and internationalised.