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Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly publication.
In opposition to the percentages, Hong Kong is again difficult for the highest of the itemizing league tables this 12 months. That’s a pointy reversal from the stalled pipeline and investor exodus of simply two years in the past. It’s cheap to query the sustainability of this momentum, however the comeback nonetheless challenges assumptions concerning the metropolis’s monetary decline.
Firms have raised $13bn from new listings within the Asian monetary hub this 12 months, in line with Dealogic, leaving it second solely to Nasdaq and nicely forward of the New York Inventory Alternate and its Chinese language friends. Whole fundraising is predicted to achieve HK$200bn ($25.5bn) this 12 months, Deloitte’s staff reckons. In the meantime, newly listed shares have returned a median of 35 per cent.
The largest driver of this surge has been massive Chinese language firms searching for secondary listings in Hong Kong — not technically IPOs however native debuts nonetheless — together with electric battery giant CATL, which raised $5.3bn. Tighter scrutiny and extended approval timelines on mainland exchanges have pushed many firms to Hong Kong for faster entry to capital. Native floats final 12 months took a median of 432 days from submitting to itemizing final 12 months, in line with Dealogic.
Geopolitical dynamics have additionally performed a big position. As US regulators improve scrutiny of Chinese language firms and delisting threats proceed to loom over these traded in New York, many mainland firms are choosing Hong Kong as a politically safer venue for international capital.
There’s loads of demand. Native retail buyers, discouraged by a sluggish property market and supported by margin lending, have piled into IPOs chasing fast returns. Leverage has amplified this frenzy with the retail portion for toy firm Bloks Group oversubscribed by greater than 6,000 occasions, for instance, whereas meals and beverage group Mixue exceeded 5,000.
But this retail rush doesn’t essentially level to an overheated market. Even after a 37 per cent acquire previously 12 months, the Grasp Seng index trades at simply 10 occasions ahead earnings, a stage that continues to be traditionally low cost and considerably decrease than comparable US benchmarks.
Extra importantly, there are indicators that institutional buyers are tentatively returning after years of retreat. Ping An Insurance coverage Group, together with different main Chinese language insurers, has elevated its publicity to Hong Kong-listed monetary shares since late final 12 months, betting that top dividend yields will offset the influence of shrinking margins.
Definitely the current rebound owes one thing to retail hypothesis and geopolitical arbitrage. However to dismiss it’s to miss the altering dynamics underneath manner. This 12 months exhibits Hong Kong continues to carry attraction as a gateway for Chinese language capital and a bridge for worldwide buyers searching for publicity to Chinese language development with out the effort of investing onshore. That position stays troublesome to duplicate.
