- City’s bourse could have as many as 160 listings raising about HK$300 billion next year, KPMG says
- KPMG remains ‘optimistic’ about IPO market despite global economic uncertainty
Hong Kong's initial public offering market, the biggest for capital raising globally this year, is expected to "stay competitive" in 2020 as more Chinese technology companies and international firms are expected to list on the city's bourse, according to accounting giant KPMG.
KPMG is forecasting as many as 160 new listings will raise about HK$300 billion (US$38.4 billion) next year, in line with this year's figures. This year's listings were led by mega offerings from Chinese e-commerce giant Alibaba Group Holding and Budweiser Brewing Company APAC. Alibaba is the parent company of the South China Morning Post.
By the end of 2019, the Hong Kong stock exchange is expected to complete 160 IPOs, raising a total of HK$307.8 billion, with its main board listings reaching a historic high of 145, according to KPMG's IPO markets 2019 review and 2020 outlook report.
"Despite the global economic uncertainty going forward, we remain optimistic about the Hong Kong IPO market in the coming year," Paul Lau, partner and head of capital markets at KPMG China, said at a media briefing on Wednesday.
Hong Kong saw a number of IPOs postponed this summer as the city has been embroiled in one of the worst political crises in its history. Protests and civil unrest for the past six months have weighed on the city's economy, hitting the retail and tourism sector particularly hard and sending the economy into a "technical recession" in the third quarter.
Valuations were pressured this summer, but have improved in recent months as Budweiser, logistics real estate developer ESR Cayman and Alibaba all came to market.
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Baker McKenzie, however, said it expects IPO activity globally to remain "subdued" next year after geopolitical tensions and over-optimistic valuations for some listings "constrained activity" in 2019.
Overall, global IPO activity has fallen 20 per cent year to date despite state-owned oil giant Saudi Aramco raising a record US$25.6 billion in its IPO last week, the law firm said in its newly released Cross-Border IPO Index 2019 report.
More than 80 companies globally pulled back on their plans to go public this year because of geopolitical factors and poor market conditions, such as low investor demand and pricing, Baker McKenzie said.
The threat of a downturn next year is "further enhanced by the upcoming 2020 US presidential election, which tends to increase volatility in the global market", the law firm said.
"Uncertainty will always influence the markets, with few major financial centres escaping unscathed this year. While the disturbances in Hong Kong did hamper activity to a degree, performance remained relatively stable " as the infrastructure and investor base was still reliably there for issuers," Ivy Wong, Asia-Pacific chairwoman for capital markets at Baker McKenzie, said.
The successful US$12.9 billion offering by Alibaba may prompt other Chinese technology leaders currently listed overseas to consider returning to Asia through a similar secondary listing in Hong Kong, said Irene Chu, partner and head of new economy and life sciences at KPMG in Hong Kong.
"A lot of these companies are also expanding rapidly in the Asia-Pacific reason, so coming to Hong Kong for a secondary listing makes a lot of sense," she said. "This will enable Chinese investors to also tap into their own companies."
Some of China's biggest new economy names, including Baidu, JD.com and Weibo, are among a small universe of companies who previously raised capital in the United States and could easily pursue their own secondary listing in Hong Kong thanks to a rule change by the city's bourse.
The listing reform made it easier for companies with dual classes of shares " a structure favoured by technology companies such as Facebook and Google " and pre-revenue biotechnology firms to seek secondary offerings in the city. It came after the Hong Kong stock exchange lost out to New York in a race for Alibaba's US$25 billion IPO in 2014.
"Chinese companies being listed in China or Hong Kong should be the starting point," KPMG's Lau said. "We've seen changes of regime and we've now got the infrastructure that we need to welcome these companies back to Hong Kong or to the mainland."
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