Caixin
Dec 18, 2019 04:39 AM
FINANCE

Hong Kong Ranks Top in Global IPO Markets for 2019

Hong Kong IPO market was boosted in 2019 by blockbuster listings such as Alibaba Group Holding and Anheuser-Busch InBev. Photo: VCG
Hong Kong IPO market was boosted in 2019 by blockbuster listings such as Alibaba Group Holding and Anheuser-Busch InBev. Photo: VCG

Hong Kong remains the world’s top destination for initial public offerings (IPOs), mainly boosted by listings of mainland companies, even though the market was significantly dampened by seven months of social unrest.

The total of IPOs expected on the Hong Kong market this year is expected to reach 159, down 22% from 2018, raising total proceeds of HK$310.5 billion ($39.86 billion), an increase of 8% from last year and ranking No. 1 globally, according to a report Tuesday by global consulting group Ernst & Young, also known as EY.

Most of the Hong Kong listings occurred in the second half, contributing nearly 80% of the city’s total IPO proceeds this year, benefited by blockbuster listings such as Alibaba Group Holding and Anheuser-Busch InBev.

The top 10 IPOs raised HK$209.3 billion, accounting for 67% of total proceeds this year. Among them, Alibaba’s HK$101.2 billion secondary listing contributed nearly half, making it the world’s biggest offering this year, outpacing ride-hailing giant Uber’s $8.1 billion offering in May. Alibaba already set a global record with its $25 billion IPO in 2014 in New York. Budweiser Brewing Company APAC Ltd., the Asia-Pacific beer unit of Anheuser-Busch InBev NV, raised $5 billion in the world’s second-biggest IPO this year.

More than 60% of Hong Kong IPOs came from the mainland, compared with 44% in 2018. Mainland companies raised 76% of the total proceeds, down from 95% last year, the report shows.

But only 15 companies were listed on the HKEx’s Growth Enterprise Market (GEM), accounting for 9% of the exchange’s total IPOs, the lowest since 2011. These companies raised HK$1 billion, down 80% from 2018. The GEM has lower listing eligibility criteria compared with the main board, serving the needs of small and mid-sized issuers. But a recent revision of GEM listing rules made the minimum requirement close to that of the main board, making it less appealing, the report said.

Even though the number of IPOs remained robust, pricing was relatively conservative. More than half of the IPOs were priced at the low end of their price range and just 13% were priced at the high end. The average return on debut stocks was 8%, down 8% from last year, according to the report.

Globally, trade tensions, pessimistic sentiment and persistent geopolitical uncertainties led to a tepid year for IPOs. The total number of IPOs is expected to decline 19% to 1,115 in 2019, and total proceeds are expected to drop by 4% to $198 billion. If not boosted by the blockbuster offerings of Alibaba and Saudi Arabian Oil Co. in the fourth quarter, the decline could have been deeper.

China’s A-share market was another highlight in the otherwise muted global IPO market, boosted by the launch of China’s STAR Market, the Nasdaq-style high-tech board of the Shanghai Stock Exchange.

A total of 200 companies are expected to list on China’s A-share market in 2019, an increase of 90% from 2019. The total IPO proceeds were 252.8 billion yuan ($36.1 billion), up 82% from last year, the highest since 2012. The STAR Market accounted for 33% of China mainland’s IPO activity. The average 115% debut return of the listings on the STAR Market also exceeded those of other markets.

As more mainland companies chose domestic listings, fewer companies from the mainland and Hong Kong went to the U.S. A total of 34 Chinese mainland and Hong Kong companies conducted U.S. IPOs this year, down 13% from 2018. The total proceeds declined by 62% to $3.64 billion.

EY projected that China’s A-share IPOs will remain robust in 2020 with a large number of companies in the pipeline. China’s lead in commercialization of 5G technology will also bring more high-tech IPOs, the report said.

Contact reporter Denise Jia (huijuanjia@caixin.com)

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