Hong Kong’s IPO market to stabilise amid listing reforms and lower interest rates, PwC says

Hong Kong’s capital market will benefit from a drop in bearish factors, demand for corporate development financing, and return of capital from Europe, the US and the Middle East to Asia, which will increase market liquidity and improve valuations, the audit and consulting firm said on Tuesday.

In addition, the implementation of Chapter 18C listing regime will help connect specialist technology companies with international funds. The reform, which took effect last March, allows firms with at least HK$10 billion (US$1.28 billion) valuation to launch IPOs before registering any sales. The threshold is further reduced to HK$6 billion if such firms have at least HK$250 million in sales in the financial year before the IPO.

“We are optimistic about Hong Kong’s stock market this year,” said Benson Wong, entrepreneur group leader at PwC Hong Kong. “We expect three to five specialist technology companies will list in Hong Kong through Chapter 18C in 2024.”

PwC predicts 80 companies will list in Hong Kong this year, with fundraising set to exceed HK$100 billion. Last year, fundraising in the city fell 56 per cent, with 73 companies mopping up HK$46.3 billion.

The financial markets’ expectations of monetary easing by the Federal Reserve have been building up recently on signs of cooling inflation, which fell below 3 per cent in November, facilitating outflows to cheaper assets elsewhere globally. The inflows will only increase once the Fed starts cutting rates, with some analysts expecting the first reduction in March.

Hong Kong reforms for listings by SPACs, pre-revenue firms yield little success

Wong said specialist technology companies in the semiconductor and artificial intelligence fields have great potential to attract investors’ attention.

“With interest rate divergence, the listing of Chinese concept stocks and specialist technology companies in Hong Kong after a valuation rebound will contribute to the stability of the capital market and boost market confidence,” he said.

Last year, bourse operator Hong Kong Exchanges and Clearing (HKEX) proposed reform measures for GEM, the board for small and medium-sized enterprises and technology start-ups, which included adding an alternative eligibility test, removing mandatory quarterly reporting intervals and streamlining the process for transferring listings to the exchange’s main board.

FINI, or the “Fast Interface for New Issuance”, launched in November last year, will shorten the settlement cycle to two days from five by modernising and digitalising the IPO settlement process.

The growing market interconnections between Hong Kong and other markets, such as Asean and the Middle East, will revitalise the city’s IPO market, according to Eddie Wong, capital markets services partner at PwC Hong Kong.

HKEX has included the stock exchanges of Saudi Arabia and Indonesia in the list of recognised bourses to attract Middle Eastern and Asean-listed companies to conduct secondary listings and promote cross-border listings.

The move will further enrich the product ecosystem of the Hong Kong stock exchange, provide investors with a wider range of investment opportunities and consolidate the city’s status as an international financial centre, he said.