New tech listings failed to buoy Hong Kong's IPO market to top spot

Total proceeds are forecasted at $130b, its lowest since 2012.

After clinching the top spot as the largest IPO market in 2016, Hong Kong is expected to slip through the ranks this year as total proceeds are expected to hit $130b – its lowest since 2012 - due to lack of blockbuster listings, according to KPMG China.

Despite the lack of mega deals, the IPO market was abuzz with activity this year as total number of IPOs are projected to hit a record high of 160 with Internet and technology-related businesses driving most of the growth for the second half of the year.

As of November 30, the Main Board recorded a total of 80 new listings for a combined $124b this year, representing a decline compared to last year’s buoyant IPO market as only 6 IPOs greater than $5b have been recorded in 2017 compared to last year’s 10. 

The financial services remained the top contributor to the Main Board’s proceeds, accounting for 53% of total raised funds whilst the technology, media and telecommunications sector rallied in the last quarter with the listings of China Literature and Razer and represented 16% of total proceeds.

This year also saw a wave of new listings from what KPMG calls ‘new economy’ companies in the second half of the year, all of which are oversubscribed by local investors and recorded first-day trading gains.

“We are starting to see a shift in the major contributors to the IPO market from traditional financial services companies to ‘new economy’ companies related to internet and technology businesses driving new listings in the market,” said KPMG China Head of Capital Markets Development Group Maggie Lee.

New economy companies, which include e-sport, online automobile financing, online insurance and e-books, snagged four of the top 10 largest IPOs this year.

Moreover, KPMG notes that IPOs from these companies were oversubscribed which indicates a strong investor appetite in these businesses.

Despite a slowdown this year, KPMG believes that the ongoing discussion of listing reform will increase the attractiveness of Hong Kong as a top IPO destination as overseas companies are showing greater interest to take advantage of the city’s high valuations.

“Hong Kong is expected to be dominated by small and medium-sized IPOs in the coming year, and the number of GEM listings is likely to remain at a similar level with the new Main Board and GEM Board listing requirements taking effect. We forecast that the total proceeds for 2018 will exceed $200b, depending on the choice of listing locations for a few mega-sized IPOs and the progress of SOE reforms,” KPMG added.