IPO Revival Expected in 2024

A quick look at the listing applications on the Hong Kong Exchanges and Clearing’s (“HKEX”) website shows no shortage of companies seeking to raise funds and go public in Hong Kong. The queue is rather long in fact, as these companies wait for improved market conditions before going public.

2023 has not been kind to the global economy with fund raising subdued as interest rates remain high amid a host of economic and geopolitical uncertainties. This dullness has been felt in the Hong Kong financial and investment market for the last 12 months, with the number of listings dropping 19% year on year to 73 companies going public, and with fund raised decreasing 56% from 2022, at HK$46.3 billion.

Yet there are strong signs of a more energetic 2024.

HKEX’s initiatives, such as various agreements signed with overseas exchanges, introduction of the GEM reforms and the Fast Interface for New Issuance digital platform to cut time and capital while boosting overall efficiency and management of the IPO process, further enhance Hong Kong’s position as a regional financial and investment hub, placing it in an optimum position for recovery by encouraging IPOs and making the process easier and more efficient for all local, Mainland Chinese and international firms to go public.

There should be around 80 Hong Kong IPOs raising approximately HKD100 billion in 2024. These include massive IPOs from household brand companies like SF Express, its rival and Alibaba’s logistics arm Cainiao, as well as the world’s largest home appliances producer Midea. Other firms with their IPO application submitted and waiting to go public include Al, medical imaging, intelligent driving technology, energy, battery material and chemical, music entertainment, milk tea and digital finance businesses.

While those currently undertaking their primary IPOs are mostly Mainland Chinese companies, Hong Kong also presents itself as an ideal fund-raising location for ASEAN companies for both primary and secondary listings. The southbound mutual market access mechanism, in the forms of the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect – that allow Mainland investors to invest in eligible Hong Kong-listed equities, opens up a massive pool of investors and thus would be a significant attraction for ASEAN companies to consider listing in Hong Kong.

While geopolitical uncertainties still persist, the US Federal Reserve is expected to cut rates in the first half of this year, thus unlocking capital, stimulating investment sentiment and creating the conducive conditions for IPOs. After a tough 2023, light can be seen at the end of the investment tunnel.