Hong Kong's IPO haul may hit up to $230b in 2019

The city's crammed IPO pipeline features a little over 200 applicants.

Hong Kong is expected to continue its strong IPO momentum into 2019 with around 200 IPOs raising approximately $180-230b in proceeds, according to Deloitte.

New economy firms like tech firms, pharmaceutical and pre-revenue biotech and education companies will continue to attract market attention over the coming year although potential H-share listings from existing issuers of the National Equities Exchange and Quotations may also make their presence known.

Also read: Hong Kong nine-month IPO proceeds balloon 174% as pipeline looks fit to burst

"[T]he listing platforms of the Mainland and Hong Kong will complement and supplement each other more over time on the back of the development of the Greater Bay Area, rise of more Chinese unicorns driving the new economy forward, and greater connectivity between the two capital markets," Edward Au, Co-Leader, National Public Offering Group of Deloitte China said.

Hong Kong is expected to have clinched 208 new IPOs with proceeds of nearly $286.6b in 2018 which represents a 29% YoY rise in the number of IPOs and 123% YoY growth in proceeds, according to Deloitte. The number of new listings is reported to be at a new record high and approximately 70% of the funds raised came from large IPOs from Chinese companies, including those from the new economy and with different voting right structures.

A separate report by KPMG notes that Hong Kong's IPO haul in the first 11 months of the year at US$38.4b is higher compared to New York Stock Exchange proceeds at $205b (US$26.5b) and NASDAQ’s $190b (US$24.5b).

Also read: Hong Kong looks set to reclaim IPO crown with nearly US$300b haul in January-November

The sweeping reforms to Hong Kong's IPO regime which allowed the listing of biotech firms with no track record of profitability and innovative companies with weighted voting rights (WVR) structures also paid off with three of the top ten largest IPOs in 2018 falling under the new listing regime. Additionally, four pre-revenue biotech firms and two with WVR structures have listed as of end-November.

“Healthcare / life sciences will continue to be a key driving force in the Hong Kong IPO market, stemming from the increased demand driven by an aging population in developed countries. We expect a major growth in biotech companies listing in 2019,” KPMG said in a previous report. 

Also read: US biotech firms seeking higher valuations rush to Hong Kong

Whilst the Main Board remains the most selected market as it raised the most funds in 2018, Chinext showed the steepest fall in the number of new listings compared to 2017. “Underscoring this trend in 2018, amidst the bullish US stock market, bourses there experienced a boost in IPOS from Chinese companies from 23 raising $29.72b (US$3.8b) in 2017 to about 36 with proceeds of approximately $73.51b (US$9.4b),” Deloitte noted.

It added that whilst companies continue to queue for share sales in Hong Kong, a wider influence of the trade war on the global economy is likely to surface and weigh in on sentiment during Q1 2019. However, IPO sentiment in Shanghai and Shenzhen is expected to be supported by measures such as the technology board, Shanghai-London stock connect and potential inclusion of more A shares into the MSCI.