Hong Kong's blockbuster IPO year at risk from heating trade tensions

A liquidity crunch may force smaller firms to rake in less cash.

Reuters reports that Chinese firms preparing their respective debuts in Hong Kong and New York may face a less than ideal market environment brought about by heightening tensions from the US-China trade spat. 

Although the funds raked in by IPOs the first half of the year hit US$725m and are expected to rise further as bourse reforms kick into effect, there are indications that smaller deals may be getting hurt amidst a liquidity crunch.

Also read: Hong Kong can expect at least 15 more blockbuster IPOs in the second half of the year

“If volatility continues to rise alongside secondary market deterioration, it is fair to assume that smaller deals may attract less interest due to liquidity concerns,” said Alex Abagian, Morgan Stanley’s head of equity syndicate for Asia Pacific, excluding Japan.

China’s Qeeka Home, a provider of online interior design services, earlier postponed a US$278m Hong Kong IPO, whilst Uxin, a Chinese second-hand car sales site, halved the size of its planned New York float to US$225m citing challenging market conditions. 

Hong Kong is expected to break into the top three global IPO league as bourse reforms allowing companies with dual shares and unprofitable biotech firms kicked into effect last April, according to KPMG. It currently trails behind New York, NASDAQ, Shanghai and the Frankfurt stock exchanges based on IPO proceeds on a half-year basis.

Also read: US biotech firms seeking higher valuations rush to Hong Kong

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