Shanghai IPO funds tipped to top HK
Finance | Jeannie Tang 3 Apr 2019
Deloitte believes Shanghai could surpass Hong Kong in new listings fundraising this year, but chief executive of Hong Kong Exchanges and Clearing (0388) Charles Li Xiao-jia said this should not be used as a benchmark measuring the initial public offering market.
Deloitte estimated that Hong Kong will see about 200 IPOs listing in the city this year, raising HK$1.8 trillion to 2.3 trillion, 20 to 37 percent down year-on-year, and that Shanghai will record total IPO fundraising of 1.9 trillion yuan (HK$2.2 trillion).
In the first quarter in 2019, Hong Kong reported a 16 percent year-on-year decline in total funds raised to HK$20.4 billion, with the world's second-largest IPO market falling from first place. The number of new listing companies also dropped to 37, due to external uncertainties including the Sino-US trade war and Brexit.
However, the firm expects the market to improve from the second quarter and remain in its position as the world's third top IPO market this year. Also, it predicts that two companies, intending to raise more than HK$10 billion, will list in the city this year, and one to two companies will list with the weighted voting right.
In the mainland market, it estimates 90 to 110 IPOs to list in the sci-tech innovation board, raising 80 billion to 100 billion yuan, while it believes the new board will not marginalize Hong Kong.
"Compared to the mainland's new board, Hong Kong has a higher threshold," said Edward Au, co-head of Deloitte China's national public offering group.
"It is possible that those companies will come to the Hong Kong IPO market after they expand enough to meet the HKEX's requirement by raising capital in the mainland."
Meanwhile, Charles Li expects the southbound Bond Connect will not be launched this year, due to lack of market demands and policy orientation, while he stressed that it will definitely be launched in the future.
He added Bond Connect recorded an average daily trading volume of 5 billion yuan last year, and it rose to 6 billion yuan for the first two months of this year.
Responding to IPO performance, Li said getting world number one spot should not be the main target. He added that the IPO market operates like the marathon, sometimes leading and sometimes lagging behind, and the market should be regulated in a balanced way.
Meanwhile, he said HKEX planned to raise the minimum capital requirement of new clearing members since the market expansion and the increase in trading volume may increase market risk.
However, he believes this measure will not affect more than 90 percent of brokers as it will only target new products and new members.
