According to the latest available data, in terms of the most money raised in stock market flotations, Hong Kong is on course to be the first in the world this year beating arch rival New York. However, the data also shows that those new listings have been amongst the worst performance among leading bourses.
However, despite a block buster year in 2018 in terms of volume of listings, there are fears that any new listings could result in bad performance and cloud the initial public offering (IPO) volumes for the Hong Kong exchange in 2019 which has been expecting a strong spurt in new IPOs driven by new tech-friendly rules. But a weak market has clouded those aspirations.
While some companies have postponed their planed IPO launch at the exchange, others have scaled down the size of their IPOs in recent weeks.
According to data from Dealogic, so far this year, the New York Stock Exchange sold shares worth $30.2 billion of new company listings while $31.4 billion worth of share was sold by new companies listing in Hong Kong. The Hong Kong numbers are the highest for the exchange in the last eight years.
But the data also showed that within a month of their debut, only 20 of the largest 20 IPOs that were launched at the Hong Kong exchange managed to ay prices which were more than the listing offer price. The same data for the NYSE was 16 and on the Nasdaq was 10.
The dwindling share prices of some of the largest IPOs launched at the Hong Kong exchange is depicted by the fate of Xiaomi and Meituan Dianping, which were the two largest IPOs and which collectively raised $9.7 billion, traded 19 per cent and 26 per cent below their listing prices since they were listed in July and September respectively.
The uncertainties associated with the US-China trade war since July this year has created volatility at the Hong Kong exchange in addition to reports of a slowdown of the second largest economy of the world – the Chinese economy.
This year, there has been a falloff 13 per cent in the city’s benchmark Hang Seng Index and a more than 20 per cent drop in the Shanghai Composite index. In contrast, so \far this year, there has been a 0.8 per cent increase in the S&P in the United States.
“From an investing perspective it’s obviously been terrible,” said a Hong Kong-based investor at a major asset manager.
“A lot of these companies are very interesting, they’re really attractive … and I think there’s been a certain amount of … fear of missing out,” the person said, referring to investors’ continued participation in IPOs despite their performance.
This year, the Hong Kong stock exchange had a change in its listing rules which would allow dual-class shares and following that a series of Chinese tech floats has been hosted by it. It was the absence of this rule that drove the Chinese e-commerce group Alibaba in 2014 choosing to New York to launch its record $25 billion IPO instead of Hong Kong because it was restricted from launching there due to its unusual control structure.
(Adapted from WallStreetReporter.com)