Investors Reap Rewards as Hong Kong IPO Market Sees Strong Comeback
Investors in the Hong Kong initial public offering (IPO) of Chinese cosmetics firm Mao Geping Cosmetics received an early Christmas present on Dec 10 when the company made its trading debut – the shares rose as much as 92 per cent before closing the day 77 per cent higher. It was the best first-day performance in four years and a further sign that the three-year slump in IPOs on the Hong Kong stock market is finally over.
Favourable Policies
The turning point for what looked set to be another disappointing year came in September with the blockbuster IPO of home-appliance manufacturer Midea Group. The company, which listed in Shenzhen in 2013, raised HK$35.7 billion in the largest listing in Hong Kong in three years and the second-largest globally in 2024. Although the company is in a traditional consumer-focused industry rather than a hot emerging technology sector, demand massively outstripped the shares on offer in the IPO and as at Tuesday (Dec 24), the stock had climbed more than 40 per cent from its offer price of HK$54.80.
Mainland Magnet
Midea’s listing has paved the way for a string of other IPOs from mainland companies. SF Holding listed in November, and in December, auto-driving systems maker Ningbo Joyson Electronic, pharmaceutical company Jiangsu Hengrui Pharmaceuticals, and condiment manufacturer Foshan Haitian Flavouring and Food, all announced plans to issue shares in Hong Kong. Sources have told Caixin that leading battery manufacturer Contemporary Amperex Technology and leading energy-drink company Eastroc Beverage are among others planning Hong Kong IPOs.
Global Expansion Plans
The central government’s encouragement of mainland companies to list in Hong Kong has opened up a new financing platform for their global expansion, according to Kelvin Leung, managing director at Huatai Financial Holdings (Hong Kong). Midea, for example, plans to use 20 per cent of the proceeds of its IPO for global technology research and development and 35 per cent for boosting its global distribution channels and sales networks over the next five years.
Conclusion
The Hong Kong IPO market is showing signs of recovery, with the number of companies listing on the exchange increasing and the amount of funds raised reaching HK$83 billion, 80 per cent more than in 2023. This is a welcome turnaround from 2023, when the city’s IPO market plunged to its worst showing in 20 years and only HK$46.3 billion was raised in total from 73 listings amid poor market sentiment. With the implementation of favourable policies, the HKEX is expected to continue its upward trend, with forecasts suggesting that IPOs in Hong Kong are set to recover further in 2025, with total fundraising projected to reach HK$100 billion to HK$120 billion, pushing the bourse back to its position among the top three global exchanges in terms of IPO fundraising.
FAQs
Q: What was the best first-day performance in the Hong Kong IPO market in 2024?
A: The best first-day performance was the 92 per cent surge by Mao Geping Cosmetics, which listed on Dec 10.
Q: What was the largest listing in Hong Kong in 2024?
A: The largest listing was the HK$35.7 billion IPO of Midea Group in September.
Q: What is the expected total fundraising in the Hong Kong IPO market in 2025?
A: The total fundraising is projected to reach HK$100 billion to HK$120 billion, pushing the bourse back to its position among the top three global exchanges in terms of IPO fundraising.
