Hong Kong clinched $21.19b across 35 IPOs in Q1 2019

The industrials sector received the highest number of IPOs with seven deals with a total of US$263m.

Despite a general global slowdown in initial public offering (IPO) activity, the Hong Kong Stock Exchange (HKEx) ranked first by both volume and proceeds with $21.19b (US$2.7b) clinched across 35 IPOs during the quarter, placing it amongst the top 10 global exchanges, according to EY’s Global IPO trends: Q1 2019 quarterly report.

By sector, industrials received the highest number of IPOs with seven deals, racking in a total of $2.06b (US$263m) during the quarter. Consumer products (five deals) and real estate (four IPOs) followed suit, earning $2.94b (US$375m) and $3.47b (US$443m), respectively.

Hong Kong also ranked as the top initial public offering (IPO) destination in Q1 2019 with a total of five cross-border IPO deals sealed during the quarter amidst the slowdown in activity, the report highlighted.

The report noted that the largest IPO by proceeds witnessed in Hong Kong’s main market in Q1 was by auto finance firm Shanghai Dongzheng Automotive Finance Co. which bagged $2.81b (US$358m). Biopharma company CStone Pharmaceuticals clinched $2.24b (US$285m), whilst Chinese ticketing app Maoyan Entertainment earned $1.96b (US$250m). In general, median deal sizes surged 84% YoY in Q1 2019 to $275.47m (US$35.1m) from Q1 2018, whilst median post-IPO market cap leapt 69% YoY to $1.05b (US$134.5m) during the quarter from 2018. 

“After a strong IPO year in 2018, the first three months of 2019 have been quiet as a number of companies already went public toward the 2018 year-end. Additionally, new restrictions on “back door” listings has limited IPO activity on the junior market GEM to only four IPOs raising a total of $290.39m (US$37m) in Q1 2019, compared with 33 IPOs that raised $2.24b (US$286m) in Q1 2018,” the report’s authors added

And whilst Hong Kong experienced a remarkably strong 2018, 2019 is expected to be comparatively slower with smaller IPO sizes and fewer mega deals, EY said in its report. Despite the negative impact of the US-China trade tensions, Hong Kong continues to be an important market for technology IPOs. New-economy firms like pharmaceuticals and pre-revenue biotech and education companies will also continue to attract market attention.

The report’s authors also noted that it anticipates that HKEx regulatory reform will continue to play a positive role in attracting IPO activity amidst cautious investor sentiment of new share listings, as they wait and see how geopolitical uncertainty, trade issues and a likely increase in interest rates could impact the capital markets, and by extension, investor sentiment for IPOs.

“In Hong Kong, companies remain optimistic in their desire to go public, with more than 192 companies having issued Application Proofs. However, Hong Kong may face new challenges as competition with other global exchanges increases, including from Shanghai's new technology board, for mega new listings in 2019,” the report’s authors added.

EY also noted in its report that it anticipates more unicorn IPOs to list in 2019 in mainland China and Hong Kong markets, primarily from the technology, media and entertainment and telecommunications, education, consumer products and health care sectors.