Hong Kong IPO market poised for major rebound in second half of 2023, says KPMG China

The first Specialist Technology Company under the new Chapter 18C has debuted, and more is expected to follow

The first Specialist Technology Company under the new Chapter 18C has debuted, and...

03 July 2023

3 min read

3 July 2023, Hong Kong (SAR), China ("Hong Kong") – Global IPO activities remained weak in the first half of 2023 amid a challenging market, but the Hong Kong IPO market was once again able to demonstrate its resilience, recording slight increases in both the number of deals and total funds raised in the first half of 2023 as compared to the same period of 2022. With a stable IPO pipeline and the new listing regime for Specialist Technology Companies, the Hong Kong IPO market is poised for a major rebound in the second half of the year, according to KPMG's Chinese Mainland and Hong Kong IPO markets 2023 mid-year review.

Inversely, global IPO activities recorded significant decreases of approximately 10% and 40% in the number of deals and total funds raised in the first half of 2023 respectively, where inflationary pressure, interest rate hikes, geopolitical uncertainties, financial market instability, and sluggish post-pandemic recovery delayed IPO plans. The Shanghai Stock Exchange and Shenzhen Stock Exchange continued to outpace their global peers in terms of both funds raised and number of deals, contributing to over 50% of global IPO funds raised, and once again ranking first and second respectively among all listing venues across the globe in the first half of 2023.

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

Global IPO activity slowed significantly towards the end of 2022, and has remained sluggish in 2023. This trend is attributed to factors including inflationary pressures and rising interest rates, which have been further exacerbated by the emergence of financial market instability in early 2023. However, there are indications that the situation may be improving. The U.S. Federal Reserve's recent announcement to halt its rate hike is expected to reduce monetary uncertainty, which could motivate IPO applicants to pick up their pace in the second half of 2023.

For the A-share IPO market, if two mega-sized deals which raised RMB88 billion in the first half of 2022 are excluded, funds raised would have remained steady in the current period, being only 5 less than the first half of 2022. On the other hand, there was a slight increase in the number of completed IPOs largely driven by Beijing Stock Exchange’s activity in the first half of 2023, where it more than doubled the number of deals completed as compared to the same period last year. The Beijing Stock Exchange’s success is an important piece to the overall development of a healthy, multi-layered capital market in the Chinese Mainland.

The A-share market is expected to remain as one of the top listing destinations in the second half of 2023 backed by its solid pipeline of more than 1,000 applicants and Chinese Government’s commitment to aid economic recovery.

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

The Chinese Mainland is expected to continue implementing accommodative policies to support economic recovery, including enhancement of the A-share fundraising environment through regulatory reforms, which is expected to further boost momentum for the A-share markets in the coming quarters.

Hong Kong IPO activities started the year off slowly but was able to recover its footing in the second quarter by completing IPO deals with average deal sizes more than double those of 2023 Q1. Total funds raised in the Hong Kong IPO market remained stable at HKD 17.8 billion while IPO deals increased by 30% to 31 deals compared to the first half of 2022.

The Specialist Technology Companies regime became effective on 31 March 2023, and an IPO application under the regime was filed in the second quarter, marking the first of many more to come.

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

The new Chapter 18C is designed to help companies with Specialist Technology (such as artificial intelligence, robotics and automation, as well as semiconductors) gain access to Hong Kong's deep pool of capital, in order to develop and commercialise their technology to a wide-spread audience. In the long term, we are hopeful for major growth in the IPO markets driven by new technologies.

The Hong Kong Stock Exchange was also at full throttle on the regulatory front in the second quarter, launching its Hong Kong Dollar (HKD) – Renminbi (RMB) Dual Counter Model and announcing the anticipated release of FINI, its innovative IPO settlement platform in the 4^th quarter of 2023. Such continued improvements to the stock exchange will continue to support Hong Kong’s position as one of the leading international financial centres in the world.

Looking ahead, KPMG expects to see a number of spin-off IPOs from both international and Chinese Mainland companies, as well as a number of Specialist Technology Companies to appear in the coming quarters. Alongside a stable pipeline of over 110 active applicants, Hong Kong is poised for a major rebound in the second half of 2023.

-Ends-

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