KPMG maintains its 2014 full year IPO forecast at HKD200 billion and cites a mixed outlook, mainly driven by changes in listing plans of some of the mega IPOs. The forecast represents a growth of over 25 percent from 2013.
KPMG analysis notes that Hong Kong’s IPO proceeds (including Main Board and GEM) surged 461 percent to HKD46 billion in the first quarter in 2014 from HKD8.2 billion a year earlier. A total of 15 companies were newly listed on the Main Board of Hong Kong stock exchange during the first quarter (excludes listings by introduction or transfers from the GEM to the Main Board), up 67 percent. The strong performance is attributed to an increasing number of large scale IPOs, including HK Electric (HKD24.1 billion) and Harbin Bank (HKD8.8 billion). Six companies raised over HKD1 billion each in their IPOs in the first quarter of 2014, compared to two in a year earlier.
Rebecca Chan, Partner and Head of Hong Kong Capital Markets, KPMG China, says: “The first quarter has set the stage for a strong performing year for the Hong Kong IPO market. A number of companies have endeavoured to submit listing applications to the Exchange before 1 April 2014. This is prior to new listing rules coming into effect, which will require publication of draft listing documents. This drove a strong IPO pipeline, however the momentum is expected to reveal further for the rest of 2014.”
KPMG anticipates popular sectors for IPOs will include IT and financial services.
Chan adds: “We expect to see more acquisitions or IPOs of software companies this year, as the IT sector shows a lot of promise. This will be driven by several prominent acquisitions and strong share price performance. Meanwhile, financial services will be another popular sector for IPOs due to continuous credit tightening in China, which has created a huge non-bank financial market. The non-bank lending industry is experiencing drastic growth and the outlook for this industry remains positive as a result of this demand.”
The analysis notes that while the A-share IPO market re-opened in late 2013, there are hundreds of companies waiting in the queue to go public. KPMG estimates it will take two to three years to clear the existing backlog.
Louis Lau, Partner, KPMG China, says: “So far we have not observed any significant impact from the re-opening of the A-share market for Hong Kong and we do not believe that it will happen in the near future. Meanwhile, the US IPO market is expected to remain buoyant in 2014. As a result of the Alibaba listing, the US IPO market has almost secured its number one position in terms of funds raised in 2014.”
Chan concludes: “While the overall outlook is positive, Hong Kong’s IPO market performance will be determined by the success of the anticipated mega IPOs, the timing of QE tapering, the stability of the overall political environment, credit tightening by the PRC government and the method that state owned enterprises choose to list in Hong Kong.”
- Ends -