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Hong Kong’s IPO ranking set to slip as Nasdaq, New York and Shanghai claim top spots in 2021, KPMG reports

South China Morning Post logo South China Morning Post 09/12/2021 Georgina Lee
  • IPO proceeds seen shrinking 23 per cent this year to HK$356 billion (US$39 billion), the first decline since 2017, KPMG says
  • Recovery in 2022 should take hold in the third quarter as foreign-traded VIE-structured Chinese tech companies seek new home in Hong Kong

Hong Kong is set to end the year as the fourth-ranked venue for global initial public offerings (IPOs) as proceeds shrink amid regulatory clampdown by Chinese authorities, according to KPMG. A rebound may gain momentum in late 2022.

The city's stock exchange is likely to count 110 IPOs this year, generating HK$356 billion (US$39 billion) in proceeds, according to forecasts published by KPMG on Thursday. That represents a 23 per cent slide from 2020 when it ranked second behind Nasdaq, and the first drop since 2017.

KPMG estimated that Nasdaq, New York and Shanghai bourses will claim the top three busiest markets in a year when global IPO proceeds are expected to surge 55 per cent to US$433 billion.

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"Companies have either shifted their IPO timetable beyond this year or scaled down their fundraising since the third quarter on the back of market and regulatory uncertainties," said Louis Lau, a Hong Kong-based partner in the capital markets advisory group at KPMG China.

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IPO activities in Hong Kong would be more steady around the third quarter of 2022, Lau added, as tech companies drive new listings, including US-listed variable interest entities or VIEs. Seven US-listed Chinese tech and electric-vehicle makers have made secondary or dual -primary offerings in Hong Kong this year, contributing 27 per cent of the total IPO proceeds.

Some 100 to 200 companies may raise between HK$400 billion and HK$450 billion next year, KPMG forecasts. China will continue to support companies' funding needs, and Hong Kong would make a better venue than the US markets.

"Given the right business model, we expect companies that are structured as VIEs could still seek a listing," said Irene Chu, a partner and head of new economy and life sciences at KPMG China based in Hong Kong. "In the short term, however, there might be regulatory uncertainties that could affect an issuer's listing timetable."

The Nasdaq logo is displayed at the Nasdaq Market site in Times Square in New York on December 3. Photo: Reuters © Provided by South China Morning Post The Nasdaq logo is displayed at the Nasdaq Market site in Times Square in New York on December 3. Photo: Reuters

Chu based her view on several IPO deals in the pipeline, such as SenseTime, a VIE-type of company. China's largest artificial intelligence giant will wrap up its US$768 million offering on Friday and make its Hong Kong debut on December 17.

Chu's comment came after the China Securities and Regulatory Commission denied a Bloomberg News report that Beijing was considering banning these structures to plug a loophole as authorities began tightening cybersecurity and data privacy issues.

The government began probing into Didi Global in end-June, within days after its US$4.4 billion New York listing, sparking a trillion-dollar rout in Chinese tech stocks. Didi said on Friday it was seeking to delist from the New York Stock Exchange and seek a listing in Hong Kong.

Chu and Lau said a pipeline of Chinese companies seeking secondary listings will continue to benefit the city. More than 10 US-listed Chinese companies could make secondary or dual-primary stock offerings in Hong Kong next year.

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