Global Courant 2023-05-05 06:50:46
The Hong Kong Stock Exchange in Hong Kong, China, on Wednesday, July 13, 2022.
Paul Yeung | Bloomberg | Getty Images
Hong Kong’s largest IPO so far this year flopped last week, suggesting the market still needs time to recover, despite positive signs pointing to a recovery.
The offer has been increased $675.2 millionbut shares of KKR & Co.-backed Chinese liquor company ZJLD Group fell nearly 18% on their first day of trading on April 27.
“Sentiment in the IPO markets has not yet built up,” Ringo Choi, Asia-Pacific IPO leader at EY, told CNBC.
“A lot of industries are suffering right now,” said Choi, noting that tech companies are under pressure from tensions between the US and China and falling prices for electric vehicles, among other things.
“Valuations have not improved at this point compared to two to three years ago. We still need some time,” said Robert Lui, Hong Kong offering leader of Deloitte China’s Capital Market Services Group.
Hong Kong’s stock market was among the worst performers last year loss of 15% in 2022 for the third consecutive year of declines.
In addition to high inflation and rising global numbers, shares were also weighed down by Beijing’s zero-Covid strategy and a slump in the city’s real estate market. Chinese companies tend to launch secondary listings in Hong Kong as another location to access investors and capital.
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Irene Chu, a partner at KPMG China, said the “underlying economy is not doing well”.
“Concerns remain about the high interest rate environment and a lot of focus in the Greater China region is on the recovery of the economy,” Chu said.
Hong Kong’s two largest IPOs in 2022 have sunk on their trading debut. Chinese automaker Zhejiang Leapmotor fell 34%, while property management service provider Onewo lost nearly 7%.
The Hong Kong IPO market also started 2023 at a sluggish pace. In the first quarter of 2023, the city hosted 18 IPOs that raised HK$6.6 billion ($840 million), up from 15 IPOs that raised HK$13.6 billion in the same period a year ago, according to Deloitte data. While deal volume increased by 20%, deal value fell by 51%.
“This slow performance is in line with our forecast. It will take time for business and economic activity, especially between mainland China and Hong Kong, to fully recover after the reopening of the borders, and eventually market valuations and IPO tracking activity.’ Lui said in a Deloitte China Q1 2023 report.
Bullish for 2023
Those analysts also expect the upcoming IPOs of Alibaba’s business units to boost the Hong Kong stock exchange this year.
The Chinese tech giant broke into six separate units so that each unit except Taobao Tmall Business Group can pursue individual listings — a signal that the Chinese government is loosening its grip on tech giants. They also reportedly include the logistics branch Cainiao and grocery company Freshippo the first units to go public. Alibaba has not immediately confirmed these plans.
Deloitte’s Lui told CNBC that the “current market is much better compared to Q4 2022,” with the potential deals launching on the Hong Kong stock exchange.
“(The Alibaba spin-off) will definitely improve market sentiment and so we predicted September to December will be better,” said EY’s Choi.
“We expect the second half of 2023 to be an exciting time for the Hong Kong IPO market, with the end of US rate hikes expected to lead to a repositioning of funds’ investment strategies towards the high-growth regions of Asia like China,” Edward Au, managing partner in the southern region at Deloitte China, said the firm China’s first quarter report.
Deloitte Capital Market Services Group predicts Hong Kong will see 110 new listings by 2023 raising about HK$230 billion ($29 billion).
(TagsToTranslate)Asia Economy
