IPOs in Hong Kong, Shanghai jump amid pandemic, tensions

Initial public offerings (IPOs) in greater China jumped in the first half of this year, bucking the declines seen elsewhere due to the impact of the coronavirus pandemic.

In the first six months, listings in greater China were up 29{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} and the amount of money that was raised soared 72{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} from last year, according to data from consultancy EY. The Hong Kong and Shanghai exchanges took the lead, in terms of number of deals as well as total amount raised.

In contrast, both the number of IPOs and amount raised in other regions fell significantly as compared with the same period last year.

In the Americas, listings and proceeds each fell 30{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}. Meanwhile the number of listings in Europe fell 47{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} with proceeds down 48{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}.

“The impact of the COVID-19 pandemic continued to play a significant role in declining IPO activity in the first half of 2020,” said EY, which published the report this week.

Asia Pacific as a whole, however, was the outlier, rising 2{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} overall as proceeds jumped 56{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}.

Asia Pacific’s IPO scene was more resilient as some economies reopened earlier and were among the first to recover from the initial impact of the coronavirus, EY said.

“Strong activity on STAR Market and more mega IPOs on HKEx helped to propel the rise,” said EY, referring to Shanghai’s Nasdaq-style tech board — the Science and Technology Innovation Board, or STAR Market, as well as Hong Kong’s stock exchange.

A number of Chinese tech giants already listed in the U.S. have recently launched secondary listings in Hong Kong.

Last month, Chinese gaming giant Netease launched its listing in Hong Kong, raising 21.09 billion Hong Kong dollars ($2.7 billion).

Chinese e-commerce firm JD.com also started trading in the Asian financial hub in June, raising 30.05 billion Hong Kong dollars ($3.87 billion).

Analysts have predicted that more U.S.-listed Chinese companies will flock back to Hong Kong or the mainland as Sino-U.S. tensions rise.

Amid a tide of anti-China sentiment stateside, the U.S. Senate passed a bill last month that could essentially ban many Chinese companies from listing on American exchanges. 

“Potential changes to US listing regulations for Chinese companies may increase IPO activity on both Mainland China and Hong Kong stock exchanges,” EY wrote in its report.

Already, it said, more than 138 companies have submitted public filings in Hong Kong, indicating that businesses “have a strong desire to go public when the right IPO window opens.”

In Hong Kong, technology was among three sectors which attracted the most amount of money raised, with the other two being health care and real estate.

“The number of technology companies going public will continue to lead the trend, as technology will continue to play a key driver of the Chinese economy development,” said EY.