Bucking a traditionally slow period for initial public offerings, markets awash with liquidity saw this year their most active third quarter in the last 20 years by proceeds and the second highest third quarter by deal numbers, according to the EY quarterly report, Global IPO Trends: Q3 2020. Globally, IPOs rose 14% to 872 year-to-date with their proceeds surging 43% to US$165.3 billion.

The Hong Kong Stock Exchange (HKEX) still ranks third globally in terms of IPO proceeds during the period. And thanks to the upcoming listing of several mega IPOs, the Hong Kong IPO market is expected to maintain its growth momentum in the fourth quarter, the report says.

Hong Kong saw IPO proceeds grow 60% year-on-year in the third quarter of 2020. According to industry, technology and healthcare were the top two in the number of IPOs. Among the top five IPOs with the highest proceeds raised in Greater China, Hong Kong-listed JD.com and NetEase ranked second and fourth with US$4.5 billion and US$3.1 billion, respectively.

Following the rollout of corporate weighted voting rights (WVR) in Hong Kong in April 2018, more Chinese companies listed in the US sought secondary listings in the HKEX. Hong Kong will continue to attract technology and “new economy” companies, while a number of listings from medical technology, financial technology, supply chain, logistics, education and sustainable development industries are also expected to be listed in the city, according to the report.

Comments Ringo Choi, EY Asia-Pacific IPO leader: “Robust IPO activity in Q3 2020 suggests that Asia-Pacific companies are choosing to protect their value through capital markets in preparation for a worst-case scenario. IPO candidates are seizing opportunities to go public to shore up their capital base for future investments and remain resilient against a potential next wave of the pandemic. The strong valuations seen in some of the recently listed ‘new economy’ companies and those not impacted by the pandemic are giving positive signals to other potential IPO candidates looking to complete their transactions in the quarters ahead.”

In mainland China, the number of IPOs so far this year has surpassed the total number for 2019. Total proceeds raised reached US$50.9 billion, which is close to the highest level (US$61.5 billion) set in 2010. The launch of the pilot GEM board registration system is one of the reasons for the active IPO activities in the third quarter of 2020, the EY report says.

Says Terence Ho, EY Greater China IPO leader: “IPO activities in Greater China remained robust in Q3 2020 primarily due to supportive government policies and the pandemic situation under better control there. With a strong IPO pipeline and the prospect of some mega IPOs landing in the mainland and Hong Kong stock exchanges, 2020 is set to be another record year for the Greater China issuers.”