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Hong Kong’s IPO Scene Shows First Signs of Recovery

  • Hong Kong’s stock exchange saw a total of US$2.6 billion raised in the firs six months of this year, lifting otherwise moribund sentiment in mainland markets. 
  • Durability of the rebound is somewhat questionable given the state of the global economy but investors can remain confident that Beijing appears determined to revive China’s financial fortunes. 

After a dry first six months, there are some green shoots of recovery for initial public offerings (IPOs) in Hong Kong as several sizeable Chinese companies line list themselves on one of Asia’s most dynamic bourses.

Battery materials producer Tianqi Lithium, recently opened its books and is on track to be the first billion-dollar deal this year while China Tourism Group Duty Free looks to reinstate its offering for an estimated US$2 billion.

After years of lackluster interest in IPOs, many mid to large-sized deals are underway, suggesting that Hong Kong’s market may be embattled but not dead.

In the first half of this year alone, US$2.6 billion was raised, helping to lift sentiment amidst a slew of policy measures by Beijing to ease the impact of zero-Covid policies hammering the Chinese economy.

The uptick in Chinese IPOs, especially given Beijing’s increasingly divergent monetary policy from other major central banks could potentially help buoy sentiment as the global market starts sliding into a slump.

The rise in listings suggests an improving economic climate in terms of valuations which may have been helped by the easing of pandemic regulations coupled with Beijing scaling down its crackdown on many lucrative industries.  

Although there remains a lack of regulatory certainty on Chinese listings in Hong Kong, Chinese President Xi Jinping’s recent visit to the city and his first trip out of the mainland since the pandemic are a sign that Beijing is firmly in control of the city.

Against this backdrop, Beijing will likely ensure that whatever is headed to a listing ought to do well, especially given the drop off in retail confidence on Chinese markets.

China’s benchmark CSI 300 is now in bull territory, and the only major stock market globally to be in such an envious position, but global investors are still wary if the rebound is nothing more than a bull in a China shop.

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