Although there were fewer mega-size initial public offering (“IPO”) deals in Hong Kong in 2020 comparing to previous years, the overall IPO market in Hong Kong in 2020 still outperformed most of its peers in other jurisdictions and even surpasses the amount of fund raised in 2019, as the total amount of fund raised soared by 26% from HK$315.5 billion in 2019 to a decade high record of HK$397.7 billion in 2020.
Performance of Hong Kong IPO market in 2020
Despite the corporate finance markets of Hong Kong has been significantly affected by the outbreak of COVID-19, the Hong Kong IPO market has shown strong resilience and vitality. According to market intelligence, NASDAQ is 2020's leading IPO exchange in the globe, with the Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) being the second place, followed by Shanghai Stock Exchange, based on the IPO proceeds raised in 2020.
In 2020, there were 154 new IPO listings in the Hong Kong Stock Exchange, raising approximately HK$397.7 billion, comparing with 164 IPOs raising approximately HK$315.5 billion in 2019. This represents a 12% drop in the number of new listings, but a 26% increase in terms of funds raised and which is a record high since 2011.
The strong performance can be attributable to the launch of the Hang Seng Tech Index, the popular use of weighted voting rights (“WVR”) in giant tech companies and changes in market sentiments towards the US regulatory environment, which drives more Chinese companies to get listed on the Hong Kong Stock Exchange.
There were nine Chinese companies listed in the US having their secondary listing on the Hong Kong Stock Exchange in 2020, raising a total of HK$131.3 billion, representing approximately 34% of the total funds raised in 2020. The record high amount of fund raised demonstrates the investors’ vote of confidence in Hong Kong as the leading financial hub in Asia and as an international capital-raising platform supported by a well-developed ecosystem of banking, financial and legal services.
In 2020, Hong Kong has already become the largest in Asia and the second-largest biotech IPO market in the world as there were 22 healthcare and life sciences companies listed on the Hong Kong Stock Exchange, raising a total of approximately HK$98.8 billion. Out of these companies, 14 pre-revenue biotech companies were listed under Chapter 18A of the Main Board listing rules, raising an aggregate of approximately HK$ 41.1 billion.
Outlook of Hong Kong IPO market in 2021
It is anticipated that the global market conditions will continue to be challenging and volatile in 2021 amidst the outbreak of COVID-19. Governments of various jurisdictions will continue to adopt to quantitative easing and expansionary fiscal policy to stimulate economic recovery. Driven by the financial measures as mentioned above and the market sentiment towards the recent China-US economic tensions which drives the US-listed Chinese companies to get listed in Hong Kong, the Hong Kong IPO market is still expected to be optimistic in 2021.
It is forecast that in 2021, there will be more than 10 secondary new listings in Hong Kong to raise proceeds of over HK$100 billion, which include renowned technology and new economy enterprises, with some having corporate WVR beneficiary structures. In addition, four to five listing of giant enterprises from new economy businesses each raising at least HK$10 billion are expected to complete. Together with listing of life sciences and healthcare companies in biotech sector, improved valuations driven by a stable recovery in the Mainland economy and the increase in market liquidity, Hong Kong is expected to have about 120-130 IPOs in 2021 raising more than HK$400 billion. It is also expected that there will be a change of composition of the business in which the listing applicants engage, from the traditional real estate, financial services and construction business to technology, e-commerce and biotech business.
It is expected that Hong Kong’s well developed stock market, supported by sophisticated banking, financial and legal services and free-flow of capital will continue to be one of the most attractive fundraising venue for companies around the globe. The proven fundraising capability of the Hong Kong stock market is expected to attract US-listed Chinese companies to get secondary listing in Hong Kong.