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HONG KONG EXCHANGES AND CLEARING LIMITED

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Delayed Hong Kong Stock Exchange  -  04:08 2022-07-06 am EDT
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Hong Kong new listings volume sinks to 9-year low on China slowdown

05/19/2022 | 04:07am EDT
FILE PHOTO: HKEX sign is seen at the 2020 China International Fair for Trade in Services in Beijing

HONG KONG (Reuters) - Hong Kong's new listings volume plunged 90% to a nine-year low this year, data showed, as China's sharp economic slowdown and its regulatory drive cast a long shadow over the city's prospects as a destination for initial public offerings (IPOs).

The drying up of share listings in Hong Kong bodes ill for investment banks, who make about a third of their revenue in the region from equity capital market deals, and for the Chinese-ruled territory's status as a global financial hub.

Only $2.1 billion has been raised this year via IPOs and secondary listings in Asia's most popular fundraising venue compared to $20.7 billion by the same time last year, according to Refinitiv data, the slowest start to a year since 2013.

"One of the reasons for the IPO market in Hong Kong falling so sharply is the deteriorating financial performance for most of the applicants in the previous financial year, and it is possible that will the case for the first half of the current year too," said Frank Bi, partner at law firm Ashurst.

"Such adverse change effectively delays the application timetable."

JD Technology, the fintech arm of Chinese e-commerce company JD.Com, is the latest to delay an up to $2 billion Hong Kong IPO because domestic regulatory approval for the deal has not been forthcoming, Reuters reported last week.

And plans by Full Truck Alliance Co Ltd, China's 'Uber for trucks', to raise $1 billion in a Hong Kong listing this year have been paused as the cybersecurity regulator has yet to announce findings of a probe into the company.

More Chinese companies are expected to either withdraw or delay filings for listing this year as weaker secondary markets are also weighing on investor appetite for new equity offerings, bankers and lawyers said.

Hong Kong's Hang Seng Index is down 14.1% year-to- date in 2022, while the MSCI's broadest index of Asia-Pacific shares outside Japan is off 14.4%.

"From the investors' point of view as well, with the markets being unforgiving, any doubts about a listing candidate's prospects will likely lead to them being more cautious," said Sumeet Singh, Aequitas Research analyst who publishes on Smartkarma.

"On top of the global volatility, China's COVID lockdowns and tech regulations aren't very helpful for capital markets."

In the global listing league tables, bourse operator Hong Kong Exchanges and Clearing's (HKEX) ranking has dropped to 10th this year from third last year.

"We are confident in the long-term attractiveness of Hong Kong's markets and are pleased to see a strong pipeline of over 170 active listing applications," said an HKEX spokesperson.

FEE DROP

The crumbling listing activity could pose a challenge to Hong Kong's incoming Chief Executive John Lee who has promised to maintain the city's status as a global financial centre.

It also presents a major problem for banks - they earned $33 million in fees for working on Hong Kong IPOs this year, compared to $221 million at the same time in 2021, according to Dealogic data.

Some were optimistic, though, given the city's strategic importance.

Although the Hong Kong market has been "very wobbly", the city's IPO prospects should bounce back once the volatility subsides as it's an important "venue that bridges China with the rest of the world", said Li He, a partner at law firm Davis Polk.

(Reporting by Scott Murdoch in Hong Kong; Editing by Sumeet Chatterjee and Muralikumar Anantharaman)

By Scott Murdoch


© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
FULL TRUCK ALLIANCE CO. LTD. 5.59% 9.44 Delayed Quote.12.78%
HONG KONG EXCHANGES AND CLEARING LIMITED -0.70% 367.8 Delayed Quote.-18.66%
HONG KONG HANG SENG -1.22% 21586.66 Delayed Quote.-6.60%
JD.COM, INC. -1.85% 64.73 Delayed Quote.-7.62%
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Financials
Sales 2022 20 846 M 2 656 M 2 656 M
Net income 2022 12 416 M 1 582 M 1 582 M
Net cash 2022 50 172 M 6 393 M 6 393 M
P/E ratio 2022 37,9x
Yield 2022 2,32%
Capitalization 465 B 59 311 M 59 311 M
EV / Sales 2022 19,9x
EV / Sales 2023 17,1x
Nbr of Employees 2 146
Free-Float 94,1%
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Number of Analysts 30
Last Close Price 370,40 HKD
Average target price 433,03 HKD
Spread / Average Target 16,9%
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Managers and Directors
Alejandro Nicolas Aguzin Chief Executive Officer & Executive Director
Bik Yun Lau Group Chief Financial Officer
May Lung Cha Non-Executive Chairman
Chung Kwong Leung Group Chief Technology Officer
Trevor William Spanner Group Chief Information Officer
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