Hong Kong IPO Volume Drops Back to Pre-COVID Levels, Falling Behind China’s A-Share Market

According to the data compiled by Bloomberg, the total volume raised in Hong Kong IPO market in the first half of 2022 was USD 2.7 billion from 27 deals, a 91.3% drop from the same period last year when the total volume was at USD 31 billion in the midst of COVID-19 pandemic. Volumes in the second quarter of 2022 was particularly low, with only USD 0.8 billion in offerings, the lowest number for a quarter for the last decade. Meanwhile, China’s A share IPO market volume surpassed the US for the first time, making China the world’s largest IPO market in the first half of 2022.

Some reshuffle of the top banks was seen in the shrinking market condition. According to the latest Bloomberg League Table report, a number of smaller investment banks, such as BNP Paribas, DBS Group, Zhongtai Securities, and Valuable Capital, made it to the top of the ranking and outperformed their larger peers. BNP Paribas, in particular, jumped by 51 places to the very top, becoming the top IPO bookrunner in Bloomberg Hong Kong IPO League Table, taking a market share of 11.7% and outperforming the world’s largest who regularly make into the top of the ranking.

Another noticeable trend in Hong Kong is the increase in gross fee. Compared to 2021, the average fee for the first half of 2022 rose by 35% from 1.95% to 2.64%, making it more expensive to list in the Hong Kong market. There has never been a period when it was at this level. However, the fees are still lower than some major markets such as China and the US.

The Hong Kong IPO market not only suffered from decrease in volume and deal count, but also from lackluster returns. The market has mostly been enjoying positive returns for first day closing as well as first month closing and peaked in 2020 with the average increase to the first month closing of 31.4% despite the COVID-19 outbreak. In the first half of 2022, however, the strong performance didn’t continue and instead, recorded a 4.9% loss on average, a drop of an average of 27% return in 2021.

In the second half of 2022, the market has already seen a recovery with 15 IPOs trading in July raising a total of USD 2.3 billion, almost as much as what was raised in the first half. Among the 15 deals, Tianqi Lithium Corp’s USD 1.71 billion is the largest deal so far this year, and the first over USD1 billion deal since September last year. Also with 10 SPAC IPO applications waiting to be approved by the Hong Kong exchange for at least HKD 1 billion each, the market may recover further. However, the situation may not be as promising as these numbers suggest.

Sharnie Wong, Senior Analyst at Bloomberg Intelligence, said, “Hong Kong’s initial public offerings could stay slow even after the slump in funds raised in the first half of the year. Investors may stay wary amid China’s pursuit of “Covid-Zero” and lack of clarity on the easing of Beijing’s regulatory crackdown. IPO applicants need to navigate a web of new cybersecurity, national security and overseas listing rules.”

Bloomberg users can access {LEAG-GO-} in the Bloomberg Terminal, load the “Report” tab to read “2022 H1 Hong Kong Capital Market League Tables”, as well as other Global League Tables.