PwC: With small and medium-size enterprise to dominate the IPO market, Hong Kong will continue to thrive in 2019
Hong Kong market expected to raise between HK$200 to 220 billion in 2019
One to two mega-sized IPOs are predicted to be listed on Hong Kong Stock Exchange (HKEX) in 2019
Proposed Shanghai Stock Exchange’s Science and Technology Innovation Board (STIB) is expected to take effect in the first half of 2019 and will enhance the diversification of China’s capital market
HONG KONG, 2 January 2019 – PwC expects Hong Kong market will be dominated by small and medium-size IPOs in 2019, with an expected total fundraising between HK$200 to 220 billion supported by a healthy pipeline of over 200 companies lining up for floats and possibly one to two mega-sized IPOs. Proposed STIB is expected to take effect in the first half of 2019 and will enhance the diversification of China’s capital market by providing an alternative listing choice for Chinese technology and innovation enterprises with different listing needs.
There were a record-breaking 218 new listings in 2018 in terms of numbers of IPOs, of which 143 were Main Board listings, mostly comprised of retail, consumer goods & services companies followed by industrial companies. However, the number of GEM Board new listed companies in 2018 has decreased compared to the number of listing in 2017. Seventy-five companies were listed on GEM Board in 2018, a slight decrease of 6% compared year-on-year. Additionally, there were three companies listed by introduction on the Main Board and 10 GEM Board listing companies switched to the Main Board listing without any funds raised.
Total funds raised by IPOs in 2018 reached HK$286.5 billion, marking an increase of 123% from the previous year. There was a stronger performance on Main Board, which recorded HK$281.4 billion of total fundraising. This is a significant increase of 130% in funds raised. The funds raised on GEM Board stands at HK$5.1 billion. This is a 14% decrease in funds raised.
Eddie Wong, Partner of Capital Markets Services, PwC Hong Kong says: “2018 has been a tremendous and record-smashing year, with 218 IPO listings for Hong Kong IPO market. As we predicted at the beginning of 2018, despite being affected by global geopolitical and economic uncertainties, Hong Kong has reclaimed the global IPO fundraising crown for 2018, supported by mega-sized IPOs and listing regulation reforms including weighted voting right and biotech listings. It is still too early to draw any conclusions about the reforms, because this year is only the first year of the reforms, which are aimed at enhancing the diversification of Hong Kong’s capital market. It will take time for investors and companies to adapt and adjust to the reforms. ”
PwC predicts 200 IPOs in 2019, including 60 on the GEM Board and one to two mega-sized IPOs on the Main Board, with an estimated total funds to be raised of between HK$200 to 220 billion. This amount is similar to the average fundraising amount for the past ten years. This level of activity will possibly see Hong Kong IPO market continue to thrive, however the total funds raised is predicted to be smaller than total funds raised in 2018.
Benson Wong, Entrepreneur Group Leader, PwC Hong Kong says: “Despite global geopolitical and economic uncertainties, such as Brexit, interest rate increment and China-US trade conflict etc, continuing to affect financial markets, we are confident that Hong Kong will continue to be the best financing platform in the region. With the healthy pipeline of over 200 companies lining up for floats for now and a possible one to two mega-sized IPOs, Hong Kong will also continue to bring together international investors and Mainland enterprises. Moreover, we saw a significant increase in the number of overseas enterprises listing inquiries from South East Asia and Europe. This shows that Hong Kong continues to establish its position as the most important Asian IPO fundraising hub.”
On the subject of Shanghai Stock Exchange’s Science and Technology Innovation Board (STIB), PwC welcomes the proposed STIB board. We believe that the launch of STIB will enhance the diversification of China’s capital market by providing an alternative listing choice for Chinese technology and innovation enterprises with different listing needs. If all goes to plan, STIB is expected to take effect in the first half of 2019.
Looking at Mainland markets, reforms have slowed down market activities. All in all, there were 105 IPOs on 3 Main Boards in the Mainland, with a total of RMB 138.6 billion funds raised. The decreases in number of IPOs and total funds raised were 76% and 40% respectively. PwC expects stabilized growth in the mainland markets, with 130 new listings and total funds raised of between RMB 120 billion for 2019.