Global IPO activities off to a slow start in 2023 Q1 amidst challenging markets

Specialist Technology Companies regime set to bolster HK’s competitiveness

Specialist Technology Companies regime set to bolster HK’s competitiveness

29 March 2023, Hong Kong – Interest rate hikes and higher than expected inflation continue to plague global IPO activities, as the number of global IPO proceeds and number of deals would record a period-on-period decrease of over 65% and 20% respectively, according to KPMG China’s latest report Chinese Mainland and Hong Kong IPO Markets 2023 Q1 Review.

The US stock exchanges remain in a slump and raised less than USD3 billion in the first quarter of 2023, which will be the lowest level for the first quarter since 2017. The stock exchanges in the Chinese Mainland and Hong Kong also recorded large declines in IPO proceeds, although they remain ranked among the top five global stock exchanges.

Paul Lau

Paul Lau, Partner, Head of Capital Markets and Professional Practice, KPMG China, says:

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Global IPO market sentiment was weak in the first quarter of 2023, with ongoing economic uncertainties further worsened by the recent financial market instability. The global IPO market will remain challenged in the short term with interest rates predicted to increase further before the Federal Reserve ends its inflation battle.

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A-share markets raised RMB78.3 billion in IPO proceeds in the first quarter, representing a reduction of 55% as compared to 2022 Q1, largely due to the lack of sizeable IPO deals completed during the quarter and the lingering effects of the pandemic. On the other hand, the A-share IPO pipeline remains strong with over 810 active applicants, as interest in the STAR & ChiNext markets remain high.

Emboldened by the success of the registration-based system first piloted on the STAR market, the China Securities Regulatory Commission announced the expansion of the registration-based system across all A-share IPO markets on 17 February 2023. The unification of listing procedures across all boards should help improve the facilitation of the multi-level capital market and continue to elevate the A-share market’s openness and vitality.

Louis Lau

Louis Lau, Partner, Capital Markets, KPMG China, says:

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The A-share markets have demonstrated a commitment to improving their system and are well-positioned to take advantage of the government’s economic stimulus to revive its IPO activities. We remain cautiously optimistic for the A-share IPO markets for the rest of the year.

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Consistent with global trends, IPO proceeds in Hong Kong diminished by 50% as compared to 2022 Q1 due to the lack of sizeable IPO deals, but were able to record a slight increase in the number of IPO deals completed, once again demonstrating the city’s resilience in challenging times. Hong Kong continues to have a healthy IPO pipeline, with over 90 active applicants at the end of the quarter.

In recent years, Hong Kong has made significant strides in attracting the listings of emerging and innovative companies, with the most recent development being the implementation of the Specialist Technology Companies regime, which will become effective on 31 March 2023. The regime will provide an alternative route for high-growth enterprises with specialist technologies to list in Hong Kong, granting them access to the city’s deep pool of capital, and continuing to bolster Hong Kong’s competitiveness and attractiveness among global stock exchanges.

Irene Chu

Irene Chu, Partner & Head of New Economy and Life Sciences, Hong Kong (SAR), KPMG China, says:

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Just as the launch of Chapter 18A led to a new biotech financing ecosystem in Hong Kong, we are confident that the new Specialist Technology Companies regime will help drive growth in talent and investments for specialist technologies in Hong Kong and beyond. In the long run, the development of a specialist technology financing ecosystem will diversify Hong Kong’s capital markets and create a more appealing environment for both issuers and investors.

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