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Hong Kong new listings volume sinks to 9-year low on China slowdown -Breaking

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© Reuters. FILE PHOTO – A Stock Exchange of Hong Kong logo (HKEX), Beijing, China September 4, 2020. REUTERS/Tingshu Wang

By Scott Murdoch

HONG KONG, (Reuters) – Hong Kong’s new listing volume fell 90% to a 9-year low in 2018, data shows. This was due to China’s severe economic slowdown, and its regulatory drive, which cast a long shadow on the city’s potential as a destination of initial public offerings (IPOs).

Investment banks in Hong Kong, which make around a third of their revenues in the region through equity capital markets deals, are facing a difficult time. This is also bad news for China-ruled Hong Kong’s position as a financial center.

This year’s IPOs, secondary listings, and other fundraising venues in Asia have raised only $2.1billion, compared with $20.7bn last year. Refinitiv data shows that this is the slowest year of 2013 since 2013.

Frank Bi, partner in law firm Ashurst, stated that one of the main reasons Hong Kong’s IPO market has fallen so steeply was the deteriorating financial performance of most applicants in the prior financial year. It is also possible this will be the case in the first half next year.”

Such adverse changes can effectively delay the application timeline.”

JD (NASDAQ) Technology is the latest Chinese e-commerce company to postpone a $2 billion Hong Kong IPO. This was due to a lack of approval from the domestic regulators, Reuters reported.

Full Truck Alliance Co Ltd is China’s Uber for trucks, but plans to raise $1 million in Hong Kong this year were halted by the cybersecurity regulator. They have yet to report on the results of an investigation.

According to lawyers and bankers, more Chinese companies will either delay or withdraw their filings this year for listing. This is because weaker secondary markets have impacted investor appetite for equity offerings.

The Hong Kong index is currently down by 14.1% in 2022. However, the MSCI broadest index of Asia-Pacific shares is at 14.4%.

Sumet Singh (Aequitas Research analyst) said that investors will be more concerned about listing candidates’ prospects because of the uncertainty in the market. He also published on Smartkarma.

“In addition to the volatility in global markets, China’s COVID lockdowns as well as its tech regulations don’t help capital markets.”

The global listing league table’s Hong Kong Exchanges and Clearing (HKEX), ranking dropped from third to 10th last year.

“We are confident in the long-term attractiveness of Hong Kong’s markets and are pleased to see a strong pipeline of over 170 active listing applications,” said an HKEX spokesperson.

FEE DROPPING

Hong Kong’s Chief Executive John Lee, who promised to keep the city as a financial hub worldwide, could be challenged by falling listing activity.

Banks also face a serious problem: They earned $33million in fees this year for Hong Kong IPOs. This compares to $221 million in 2021. Dealogic data shows.

However, many were optimistic given the city’s strategic importance.

Although Hong Kong’s market has been “very weak”, it should rebound after the volatility passes. The city is an important “venue to bridge China with the rest”, Li He said, a partner at Davis Polk.

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