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Hong Kong, 2 January 2018 - PwC expects Hong Kong will once again to be the world’s largest IPO market in 2018, with an expected total fundraising between HK$200 to 250 billion, supported by rescheduled mega-sized IPOs from 2017 and a proposed dual-class share structure, set to be implemented later this year, which will attract more companies to seek IPOs in the Hong Kong market, in additional to the approval of pilot scheme of full H-share convertibility by the Mainland regulators..
There were a record-breaking 174 new listings in 2017, of which 80 were Main Board listings, mostly comprised of industrial companies followed by retail, consumer goods & services companies. Separately, the GEM (Growth Enterprise Market) Board broke its record number of listing companies. 80 companies were listed on GEM in 2017, an increase of 80% compared year-on-year. Additionally, there was 1 company listed by introduction on the Main Board and 13 GEM Board listing companies switched to the Main Board listing without any funds raised.
Total funds raised by IPOs in 2017 reached HK$128.2 billion, marking a decline of 34% from the previous year. IPOs of 15 financial service companies continued to lead the race, making up 53% of total funds raised on the Main Board. Of those, 5 companies raised over 5 billion HK dollars. Compared with 2016, the number of new financial services company listings decreased by 21% and the total funds raised decreased by 50%. On the other hand, IPOs of 37 industrial companies captured 41% of total funds raised on the GEM Board. Compared with 2016, the number of industrial company listed on GEM surged by 131% and the total funds raised increased by 140%.
Eddie Wong, Partner of Capital Markets Services, PwC Hong Kong says: “Affected by global geopolitical and economic uncertainties, the Hong Kong IPO market slowed down in early 2017. Some companies delayed their listing schedule. However, Hong Kong stock market’s performance stepped up in the second half of the year and stimulated the investment climate. Under stimulation from GEM Board IPO activities, IPO activities increased as a whole. However, the total annual funds raised was still lower than last year. Despite dropping from the top spot to finish third behind New York and Shanghai in 2017, there were 22 Asian companies listed in 2017, compared to 8 in 2016. Furthermore, we saw significant increase in number of new economy enterprise IPOs in Hong Kong market. Hong Kong continues to establish its position as the most important Asian IPO fund raising hub.”
PwC predicts 80 IPOs in 2018, including the delayed large-scale IPOs on the Main Board and 70 on the GEM Board, with an estimated total funds to be raised of between HK$200 to 250 billion. That level of activity will possibly see Hong Kong reclaim its top spot as the market with the most funds raised globally.
Benson Wong, Entrepreneur Group Leader, PwC Hong Kong says: “Although global geopolitical and economic uncertainties, such as Brexit, the US Fed's contraction and interest rate increment etc, could continue to affect financial markets, we are confident that Hong Kong will continue to be the best financing platform in the region for bringing together international investors and Mainland enterprises, as the success of Stock Connect initiatives, which have been established for three years, has diversified Hong Kong capital markets. Moreover, it is believed that the full H-Share convertibility pilot scheme could bolsters fundraising activites, together with the upcoming new economy enterprise IPOs activities will play an important part in strengthening Hong Kong’s role as the best financing platform in the region. ”
On the subject of market reform, PwC welcomes the proposed consultation brought about by HKEX, and believes that the raising of the Main and the GEM Board market capitalisation thresholds will help to define the positions of the Main Board and GEM more clearly going forward. We believe that the proposed dual-class share structures will help the Hong Kong market to attract new economy enterprises to come to Hong Kong for fundraising and enhance the diversification of Hong Kong's capital market. If all goes to plan, it is expected that the first IPO under the new dual-class structure will be in the second half of 2018.
Looking at mainland markets, the A-share IPO market quickly recovered in the first half of 2017, while momentum has slowed down in the second half of the year due to the market response. All in all, there were 437 IPOs on 3 Main Boards in the Mainland with a total of RMB 235.1 billion funds raised. The increase in number of IPOs and total funds raised are 93% and 56% respectively. PwC expects continued stabilised growth in the mainland markets, with 300 to 350 new listings and total funds raised of between RMB 180 to 200 billion for 2018.