New offerings in Hong Kong IPO market jumped 11% in 2014

It was a record year for HK.

The National Public Offering Group of professional services organization Deloitte Touche Tohmatsu today released statistics of the initial public offerings (IPO) markets in Hong Kong and on the Chinese Mainland in 2014 including the exercise of a few over-allotment options, and announcements of final offer prices and additional new offerings during the last week of December 2014.

According to a release from Deloitte, Hong Kong has enjoyed another record-setting year in 2014. Its number of new offerings experienced a double-digit rally from 2013 to 11% while funds raised surged 35%.

Excluding the transfer of seven listings from the Growth Enterprise Market to the Main Board, the market completed 115 IPOs raising HK$227.7 billion by end of the year against 104 IPOs raising HK$168.9 billion in 2013. Both the numbers of IPOs and H-share listings reached new records.

The robust market performance was largely attributed to the inflow of capital supported by strong positive market sentiment and anticipation over the official launch of the Shanghai-Hong Kong Stock Connect Programme (Stock Connect).

Other factors boosting the market included the introduction of a series of micro-stimuli on the Chinese Mainland from May onwards and the
decision to cut lending and deposit rates by China's Central Bank in late November.

The New York Stock Exchange clearly stood first in the global IPO race in 2014 with proceeds
of HK$575.4 billion despite the fact that Hong Kong recorded four huge IPOs in December.

The London Stock Exchange took the third place with HK$192.7 billion while proceeds of
HK$179.8 billion raised at the NASDAQ put it into a fourth position.

Here's more from Deloitte:

"While we are encouraged to see Hong Kong remained as the world's second largest IPO market in terms of proceeds raised for the second consecutive year, we need to continue to bolster its competitive edge in order to stay ahead of the game with other bourses," remarked Mr. Edward Au, Co-Leader of the National Public Offering Group at Deloitte China.

"In view of the fact that listings from Chinese enterprises accounted for seven of the eight IPOs that raised more than US$1 billion and more than 80% of the market's proceeds, it is crucial to diversify our IPO market and consolidate its position as a regional IPO hub in Asia. Other top financial centres such as New York and London are assuming a similar positioning, drawing more flotations from companies of nearby and overseas countries," explained Mr. Au.

Mr. Au said that the consultation exercise on the weighted voting rights, recommendations from other authorities on raising the city's status as an international IPO centre of choice and the Stock Connect are good starting points. Deloitte looks forward to seeing how further development of these and other initiatives would attract more business from emerging sectors and overseas companies to Hong Kong through IPOs.

Based on the companies that are marketing their new shares and those which have published their post hearing information packs, Deloitte expects the market to feature about 20-25 small and medium-sized IPOs in the first quarter of 2015. The new issuers would represent a variety of sectors, including from financial, property-related, retail and technology, media and telecommunications.

Mr. Au said the new calculation for loan-to-deposit ratios for the Mainland's financial institutions will help propel market sentiment towards IPO. On the back of the China Securities Regulatory Commission's (CSRC) announcement to streamline the application materials and approval procedures of overseas listings for Chinese companies, H-share listing may break a record in 2015.

As for the Mainland's IPO market, it closed with 125 IPOs raising RMB78.7 billion on 31 December 2014. Though 10 new listings were completed in the last week of 2014, the total number of IPOs and proceeds raised during the year still fell behind of 154 IPOs raising RMB103.4 billion in 2012, the year before IPOs were suspended.

IPOs from the Main Board in Shanghai contributed most funds (43%) to the market, followed bythe SME Board (29%) and ChiNext (28%) in Shenzhen. In terms of the number of new listings, despite a new rule of allowing applicants to choose between the Shanghai or Shenzhen market to list, ChiNext (40%) took a dominant position while the Main Board (34%) and SME Board (26%) trailed.

"The CSRC's commentary of getting 100 IPO candidates listed from June to end of 2014 suggested that the market is to record at least 23 IPOs during January and February 2015. The increase in the number of companies to the meetings of the Public Offering Review Committee of the CSRC in the last two weeks of 2014 also indicated that the authority is speeding up the issuance pace moderately in order to ease the pressure on more than 600 enterprises still awaiting IPO review," noted Mr. Anthony Wu, China A-Share Capital Market Leader of National Public Offering Group of Deloitte China.

Mr. Wu said these upcoming listings are expected to be small and medium in scale in view of the ongoing concern over the market liquidity. They will also focus on companies from the manufacturing, consumer and retail and emerging industries. For businesses which are seeking large pool of funds through IPOs, many are likely to continue to destine for Hong Kong.