Great expectations for HKEx

Author: | Published: 26 Feb 2019
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The bar is set for 2019 after the Hong Kong Stock Exchange claimed the number one spot as the top IPO market globally last year. The HKEX saw 125 companies raising $36.5 billion in 2018, up 175.5% from the year before.

Meanwhile the New York Stock Exchange had 64 IPOs that raised $28.9 billion. Nasdaq was the most active exchange by volume with a total of 190 listings, including a number of tech listings from mainland Chinese companies. As for the telecommunications, media and technology sector, which remains hot, Tokyo saw the most listings, followed by Hong Kong.

2018 was a year of major reforms for the HKEX, with new listing rules allowing dual-class shares for the first time, as well as an initiative encouraging pre-revenue biotech companies to list. The rules enabled a number of new economy companies in the PRC to come to Hong Kong to raise capital, including smartphone maker Xiaomi, which raised $5.4 billion. Tech IPOs shot up 94.4% compared to 2017, raising HK$136 billion ($17.4 billion), which accounted for nearly half of total IPO fundraising in 2018.

Will the good times continue into 2019 for Hong Kong? With the ongoing trade war with the US, an economic slowdown at home and rising interest rates, the next year could be tough for the IPO market.

Yet industry participants remain optimistic. According to Deloitte the IPO momentum will continue, with around 200 offerings predicted to raise an estimated HK$180 to $230 billion in 2019. Listing platforms in both mainland China and Hong Kong should complement and supplement each other to a greater degree throughout the year as a result of the Greater Bay Area's continuing development, while more Chinese unicorns are expected to further drive the new economy forward.

Meanwhile, in mainland China, authorities are busy making preparations to attract more listings to the Shanghai and Shenzhen stock exchanges. For instance, there's the new technology and innovation board, which will experiment with a registration-based system for listed companies rather than an approval-based system, and of course the Shanghai-London Stock Connect. That is certainly a lot of work cut out for Yi Huiman, the newly appointed head of the China Securities Regulatory Commission. The main question for 2019 is: will mainland Chinese companies continue to opt for Hong Kong as in 2018, or will they choose to remain on mainland PRC soil?