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Hong Kong still leads world’s IPO market in first nine months

Hong Kong remained the world’s No 1 listings market in the first nine months as initial public offerings from companies in China helped it beat Shanghai and New York on funds raised, although total money raised in the stock market dropped 60 per cent year on year, according to Thomson Reuters data.

The 40 offerings in Hong Kong in the first three quarters amassed US$16.92 billion, representing 22 per cent of all listing funds raised worldwide. This beat the Shanghai Stock Exchange’s US$8.22 billion and third-ranked New York’s US$7.09 billion.

Benny Mau, the chairman of the Hong Kong Securities Association, said Hong Kong had benefited from listings by companies in China.

“Although China experienced an economic slowdown this year overseas markets were not doing much better. London and European markets have been volatile since the Brexit referendum when the British people in June voted to leave the EU and the US market is haunted by the interest rate issue,” Mau said.

“In comparison, many mainland firms still need to raise funds which has benefited Hong Kong,” he said.

Hong Kong was the world’s largest IPO market last year as well as from 2009 to 2011.

“I believe Hong Kong could keep the title as the top IPO market this year and maybe next year as well,” he said.

Postal Savings Bank of China, which is owned by the state, raised US$7.4 billion in its just-completed initial public offering last week, and begins trading on the stock exchange from Wednesday. It was the world’s largest offering since Alibaba Group Holding’s US$25 billion record listing on the New York Stock Exchange in 2014.

But the data also showed the city is facing challenges. In comparison with a year earlier, funds raised from all offerings this year were down 17 per cent year on year.

Taking into account all listings, share placements and rights issues, the total funds raised in the stock market stood at only US$27.61 billion, a 58.6 per cent drop year on year, according to data from Thomson Reuters.

Joseph Tong Tang, the chairman of Morton Securities, said the very strong market sentiment in the first half of last year was not repeated this year.

“But we have seen a turnaround in market sentiment in the third quarter with an increase in the number of IPOs and fundraising activity in the third quarter. Chinese investment in the Hong Kong market via the stock connect scheme also increased in the third quarter,” Tong said.

This scheme, launched on November 17, 2014, allows individual and institutional investors in Shanghai to buy shares traded on the Hong Kong stock market and vice versa, subject to daily quota limits and a maximum trade volume of 550 billion yuan. The total quota was lifted last month.

Tong said with the connection between the Hong Kong and Shenzhen stock exchanges is expected to start as early as November and would further boost market sentiment and the listings market.

“However, we need to launch a third board or revamp the Growth Enterprise Market as soon as possible to attract more technology firms to list here. The existing IPO market relies on the traditional banking and securities industries, and we have not seen many technology firms listing here. This is a problem as this shows our market is not diversified enough,” Tong said.

At least four of the world’s biggest offerings this year happened in Hong Kong but they were old economy firms. Besides Postal Bank, the other giant offers were China Zheshang Bank’s US$1.9 billion float in March, Everbright Securities’ US$1.2 billion August offering and the US$1.1 billion listing of BOC Aviation in May.

The financial sector accounted for 78.5 per cent of the listings proceeds in Hong Kong stock exchanges, raising US$13.4 billion, up 14 per cent from the same period last year. Industrials were second with 8.5 per cent market share worth US$1.4 billion.

HKEX chief executive Charles Li Xiaojia earlier in September said the exchange would explore all possibilities, including a new board, to attract new technology firms to list here.

Morgan Stanley currently leads the stock market underwriting rankings in Hong Kong, capturing 11.3 per cent market share with US$3.1 billion in related proceeds. Haitong Securities ranked second at 7.3 per cent and Goldman Sachs ranked third at 6.5 per cent, Thomson Reuters data shows.