THE US, mainland China and Hong Kong have continued to be key driving forces of the global IPO market in the first three quarters of 2019.
According to KPMG’s latest review, the A-share market in China has achieved growth compared to the same period last year as a result of the introduction of the new STAR Market, while Hong Kong’s IPO market remained stable with a strong pipeline especially from the infrastructure/real estate, TMT, healthcare/life sciences and financial services sectors.
Amid global economic uncertainties, some mega-sized companies this year have had difficulties listing, faced with a lower offering price, a reduced offer size or a need to postpone. However, based on the Hong Kong IPO market’s solid pipeline, KPMG predicts an uptick in listings by the end of the year.
As of September 13 2019, in terms of global ranking by IPO proceeds, the Shanghai Stock Exchange (SSE), Hong Kong Stock Exchange (HKEX) and Shenzhen Stock Exchange (SZSE) snapped up the third, fourth and fifth places, with total funds raised at US$12.9 billion, US$11.4 billion and US$7.5 billion respectively, ranking behind the New York Stock Exchange and NASDAQ. The HKEX is expected to rank third globally following the listing of Budweiser Brewing Company scheduled on September 30 2019, anticipated to raise US$4.6 billion.
The A-share market is forecast to record 127 new listings worth a combined RMB140.3 billion in IPO proceeds during the first three quarters of 2019, an increase from the RMB115.4 billion raised in the first three quarters of 2018, with a significant contribution from the new STAR Market. Since the first batch of companies were listed on the STAR Market on July 22, the share prices of companies listed on STAR Market have surged, averaging an increase of 216% on their offering prices 10 days after listing.
Industrials and TMT sectors continued to dominate the A-share IPO market, accounting for close to 60% of the total funds raised. Both sectors are expected to continue to be key drivers of the A-share IPO market, where the industrial sector is backed by a strong pipeline of 178 companies seeking a listing, and the TMT sector is with 97 such firms seeking to list on the traditional boards and 28 active applicants for the STAR Market, signifying keen interest across all stock exchanges for technology-related IPOs. Financial services also did well during the period, with three out of eight listings ranked among the top 10 largest A-share IPOs year-to-date.
Should the mega-sized listing by Budweiser Brewing Company go through this quarter, the Hong Kong Main Board would raise HK$124.3 billion (US$16 billion) in the first three quarters, with the number of IPO listings at 88 – identical to the total number as of the end of 2018 Q3. Consumer markets rank first among sectors in funds raised, at HK$40 billion. The healthcare/life sciences sector is projected to claim the second position in funds raised, with HK$25.5 billion (US$3.3 billion) during the same period and building on positive sentiment from last year.
The Hong Kong IPO pipeline is at a historically high level, exceeding 200 active applicants as of September 13 2019. The city is particularly active in small to medium-sized deals, with 11 medium-sized IPOs on the Main Board in 2019 year-to-date and more than 10 potential deals of this size in the pipeline. The number of medium-sized deals for the year could surpass last year’s total with 21 such deals. In addition, ESR Cayman recently announced its plans to revive its IPO in Hong Kong, and Budweiser Brewing Company is expected to list by the end of Q3. Both developments indicate an uptick in investor sentiment.