Chinese government entities, including provincial and municipal governments, councils, and investment vehicles, have continued to play a significant role in Hong Kong's IPO market. In the second quarter of 2024, these entities participated in a third of the 18 IPO deals in Hong Kong [cb95f2e2] [1b5957d2]. However, the percentage of shares taken by government-related entities has decreased. Over the past three months, at least nine government-related bodies took up an average of 24% of the shares on offer, compared to 33% in the previous 15 months [cb95f2e2] [1b5957d2]. There are concerns about excessive state involvement in IPOs, as it could distort pricing and weaken market discipline. Despite these concerns, foreign institutional buyers, including top global asset managers, have started to show interest in Hong Kong IPOs again. Companies with solid fundamentals at reasonable valuations are expected to attract more foreign funds [cb95f2e2] [1b5957d2].
The improved market sentiment, with the Hang Seng Index rebounding and expectations of a US Federal Reserve interest rate cut, is likely to bolster retail and international investor interest in Hong Kong IPOs [cb95f2e2] [1b5957d2]. Chinese provincial and municipal government-related entities are expected to remain relevant in Hong Kong's IPO market, as they continue to support Chinese companies and create local jobs [cb95f2e2] [1b5957d2].
However, PwC has downgraded its outlook for Hong Kong's IPO market, predicting that 80 companies will list on the city's stock exchange this year, raising up to HK$80 billion (US$10.2 billion), significantly lower than the previous forecast of over HK$100 billion [39ebd9b3]. The high interest rate environment and cautious investor sentiment have weighed on companies' fundraising plans. Hong Kong's IPO market ranked 13th globally in the first half of the year, with 26 companies raising US$1.5 billion. PwC is cautiously optimistic that activity will pick up in the second half, driven by the anticipated flow of global capital to Asia and the new Chapter 18C listing regime attracting technology-focused companies. The biggest IPOs in Hong Kong so far this year include Sichuan Baicha Baidao Industrial's HK$2.58 billion deal, RoboSense Technology's HK$1.06 billion share sale, and QuantumPharm's HK$989.3 million IPO [39ebd9b3] [1b5957d2].