Why IPOs are surging in Hong Kong

Hong Kong recorded its busiest year for initial public offerings (IPOs) in a decade in 2020, with newly-listed companies raising US$50 billion (HKD387 billion). 

The city’s bourse has benefitted from new economy companies – typically technology focused – which accounted for close to 60 percent of IPOs. This is partially the result of 2018 listing rules that allow pre-revenue biotech and new-economy companies with non-standard share structures to raise capital.

Biotech and property services are among the other sectors that drove listing activity over the past year. Around US$6.5 billion (HKD50.6 billion) was raised from the real estate sector, the highest on record, according to Bloomberg.

Last year, several major Chinese mainland real estate developers spun off their property-services units in efforts to raise funds to fuel growth. This included China Resources Mixc, the property management arm of China Resources Land; Evergrande Property Services under China Evergrande Group; and KWG Property’s KWG Living.

“Hong Kong is still a natural choice for Chinese companies because of its robust financial system and the advantages of cross-border investment channels made available through the Hong Kong-China Stock Connect scheme,” says Wendy Chan, growth director for the Greater Bay Area at JLL, specialising in valuation and advisory services. 

Hong Kong is expected to remain among the top three IPO markets globally in 2021, along with the Nasdaq and Shanghai. In 2020, JLL accounted for approximately 40% of the market share for business valuations in the Hong Kong IPO market.

“There is a lot of cash in a low interest rate environment, bringing a new era for corporates to transform themselves. 2021 will be a ‘year 0’ for corporates to transform themselves in the capital markets,” says Simon Chan, executive director who heads up the business valuation team for JLL's valuation and advisory services in Greater China.