After 25 years, has Hong Kong’s capital markets lost its sparkle?

Funds raised by IPOs in H122 are predicted to reach HK$17.1 b, a 92% decrease from 2021.

It has been 25 years since the Hong Kong Stock Exchange’s handover and since then it has proven its efficiency as a platform for corporate listing and financing – with a total of 2,578 companies listed and topping global IPO fundraising for seven of the last 13 years.

However, the ongoing pandemic, the risk of geopolitical instability, and other unfavourable factors such as rising interest rates to suppress global inflation have slowed down the city’s IPO fundraising activities in 2022.

Based on a PwC report, there were only 22 new listings in Hong Kong in the first half of the year, mostly comprising retail, consumer goods & services (41%), and financial services (23%).

Amid the ongoing pandemic, the risk of geopolitical instability and other unfavourable factors – including rising interest rates to suppress global inflation – Hong Kong's IPO fundraising activities slowed in the first half of 2022.

PwC Hong Kong estimates that there were 22 new listings in Hong Kong in the first half of 2022. These mostly comprised retail, consumer goods & services (41%), and financial services (23%). 

The number of its Main Board IPOs also decreased by 53% YoY. 
 
Meanwhile, total funds raised by IPOs in the first half of 2022 are predicted to reach$17.1b, marking a decrease of 92% compared to the same period last year.
 
Eddie Wong, PwC Hong Kong Capital Markets Services Partner said the slowing down of Hong Kong’s capital markets was because organisations are choosing a “‘wait-and-see’ approach to economic revival and postponing their fundraising activities due to market uncertainties. 
 
“Organisations need to be well-prepared, review their business needs carefully and go public at the right time,” Wong added.
 
The IPO market's slowdown, however, will not be for too long said PwC, adding that the market will gradually regain momentum in H2 2022 “with the support of a number of policies that are favourable to economic growth.”
 
“Hong Kong’s pipeline for IPOs remains active, with the proven fundamentals of the U.S.-listed Chinese enterprises and new economy businesses expected to continue to be the main drivers of listing activity,” Wong said.
 
This was echoed by Benson Wong, PwC Hong Kong Entrepreneur Group Leader, saying that economic growth and liquidity measures from the Government and the Central Bank will allow “Greater China companies without weighted voting rights and which are not from innovative sectors to seek secondary listings in Hong Kong.”
 
“This will attract high-quality U.S.-listed Chinese enterprises to list in Hong Kong and enhance investors’ confidence. We remain optimistic about the Hong Kong IPO market over the long run,” the PwC Hong Kong entrepreneur group leader said.
 
For the entire year, PwC expects total funds raised to be between $180b to $200b in 2022.