The market for initial public offerings in Hong Kong is expected to witness a significant improvement over the next five years, according to George Chan, global IPO leader at EY. Despite facing challenges such as high U.S. interest rates, regulatory scrutiny, slower economic growth, and U.S.-China tensions in recent years, Chan remains optimistic about the future of IPOs in Hong Kong. He mentioned in an interview with CNBC that he sees a positive trend emerging, indicating a potential revival in the IPO market in the second half of this year.
Chan attributed the recent decline in Greater China IPOs to various macroeconomic factors but highlighted that many of these trends are now beginning to reverse. He noted that there is an increasing influx of U.S. dollar funds back to Hong Kong, with the city having already factored in uncertainties that previously hindered IPO activities. Additionally, the recent measures introduced by China to promote venture capital and support IPOs in Hong Kong have been welcomed by investors and analysts, further boosting confidence in the market.
One significant development in the IPO landscape is the shift of companies from mainland China’s A share market to Hong Kong for listing. Marcia Ellis, global co-chair of the private equity practice at Morrison Foerster in Hong Kong, highlighted that the approval process from the China Securities Regulatory Commission has become more streamlined, leading to a surge in new listing applications in Hong Kong. Moreover, a growing number of mainland Chinese companies are considering Hong Kong as a preferable listing destination, given its stable economic growth and conducive market environment.
Chan predicted that consumer companies could be among the immediate beneficiaries of the improving IPO market in Hong Kong. As China’s economy gradually rebounds, there is a growing willingness among consumers to spend, particularly in less developed regions of the country. Although national-level data showed a slower growth in retail sales, Chan remains optimistic about the potential for consumer-focused companies to attract investors in the upcoming IPO wave.
Despite the challenges faced in recent years, the Hang Seng Index has shown a positive trajectory, indicating a recovery from its prolonged decline. The Hong Kong IPO market saw a 34% drop in fundraising during the first half of the year, but industry experts remain hopeful for a turnaround in the coming months. With a strong pipeline of listings awaiting approval, as mentioned by Bonnie Chan, CEO of Hong Kong Exchanges and Clearing Limited, the stage is set for a revival in IPO activities in Hong Kong.
Investors and companies are closely monitoring the IPO landscape, with a keen interest in the speed of approvals and market conditions. As global central banks ease off aggressive interest rate hikes, venture funding into Chinese startups is expected to regain momentum. Although geopolitical tensions and data security concerns pose challenges for China-based companies seeking listings in the U.S., experts like George Chan believe that these hurdles are temporary and that the landscape will improve over time.
The outlook for the initial public offerings in Hong Kong appears promising, with several factors aligning to support a resurgence in IPO activities. As the market adapts to changing dynamics and investors show renewed interest, we can anticipate a period of growth and expansion in the coming years.