After a dismal first six months of the year, things are looking up for initial public offerings (IPOs) in Hong Kong as several large Chinese firms line up to list in the territory in the second half.
Battery materials producer Tianqi Lithium Corp (天齊鋰業) just opened its books for what is set to be Hong Kong’s first debut of the year that is expected to raise more than US$1 billion, while China Tourism Group Duty Free Corp (中國旅遊集團中免) might relaunch an offering of about US$2 billion.
Along with several other medium-size to large deals in the pipeline, they are poised to revive a dormant market in which firms raised a paltry US$2.6 billion between January and last month. That was a 92 percent slump from the same period last year and the lowest sum for the first half of a year since 2009.
Photo: Bloomberg
The pickup in upcoming listings speaks of an improving environment for valuations as the easing of COVID-19-related curbs and Beijing’s dialing back on a corporate crackdown spur a world-beating rally in stocks in China and Hong Kong.
Better clarity on rules for Chinese share offerings abroad could also “encourage more new listings” in Hong Kong, Credit Suisse Group AG analyst Charles Zhou (周成) wrote in a note last month.
The flow of positive news from China has propelled the benchmark CSI 300 Index toward a technical bull market, and analysts are expecting more constructive policy reinforcements in the second half of the year.
“If it happens, that would hopefully help to push through some of our pipeline of equity deals that are waiting for a better market window to open,” said Selina Cheung (張倩嘉), cohead of Asia equity capital markets at UBS AG in Hong Kong.
In the first half, Hong Kong saw only one IPO that was larger than US$500 million — in January. The majority of companies that have debuted this year are trading below water.
Notably, IPO activity has dried up globally as investors fret over inflation, hawkish central banks and recession fears.
Hong Kong’s dry spell now looks set to end with a flurry of smaller deals coming through late last month, as issuers hurried to take advantage of a short window favoring Chinese equities.
Tianqi Lithium’s potential US$1.7 billion listing paves the way for this month to be the strongest month for IPOs in Hong Kong this year. The pipeline of offerings of about US$500 million or more also includes snack maker Weilong Delicious Global Holdings Ltd (衛龍美味全球控股) and Wego Blood Purification (威高血液淨化), a dialysis unit of China’s Wego Group (威高集團).
China’s Imeik Technology Development Co (愛美客技術發展), which has a market cap of US$19 billion, has also filed for a listing on the Hong Kong Stock Exchange.
Many of the potential listings are already trading in New York, but are trying to tap investors closer to home due to fears of being kicked out by China’s financial watchdog due to a regulatory impasse with the US. Such is the case for consumer goods retailer Miniso Group Holding Ltd (名創優品集團控股), which is seeking up to US$116 million.
Others have opted to go public in Asia by way of introduction, a mechanism that does not involve selling new shares.
A number of companies have “continuously” worked on their listing plans as they wait for a market window to reach ideal valuations, China International Capital Corp (中國國際金融) equity capital market head Shi Qi (施琦) said. “Looking ahead, companies related to stable growth policies and social wellbeing could see better opportunities in the market,” she said, citing themes like carbon neutrality, environmental governance, new energy, consumption and healthcare.
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