HONG KONG, Oct 13 (Reuters) – Hong Kong dealmakers expect China’s 20th Party Congress next week to announce a shift of focus in Beijing back to business and economic issues that could help lift the city’s IPO issuance from a nine-year low to revive.
Ongoing COVID-19 lockdowns have been blamed for dramatically slowing China’s economic growth, isolating it from the rest of the world and curbing investor appetite to buy into Chinese assets.
Any shift toward opening China’s borders and stimulating demand there would boost confidence and business transactions, lawyers and analysts said. Hong Kong has only recently begun its own reopening, easing its strict virus policy that has tarnished its reputation as a global financial hub.
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“Hopefully, the global economy will improve in the next year, and I expect that after the 20th Congress, China will focus more on business and economic issues,” said Richard Wang, partner at Freshfields in Hong Kong, adding, that this should lead to more companies looking for capital.
Initial public offering (IPO) activity in Hong Kong, traditionally dominated by mainland Chinese companies, has fallen to a nine-year low amid a collapse in Chinese markets, escalating China-US tensions and a tightening regulatory environment in China.
Ambitions for an international listing have been put on hold since China announced new rules for companies looking to sell shares outside mainland markets, which have yet to be finalized.
Hong Kong IPOs were worth just $9.28 billion this year, up from $37.1 billion in the same period of 2021, according to figures from Refinitiv. The value of new share sales is the lowest since 2013 .
Additionally, more than 80% of Hong Kong IPOs this year have traded underwater since their debut, according to data from Dealogic.
IPOs in mainland China have raised $54.12 billion, down 33% from $80.89 billion in the first three quarters of 2022, according to Refinitiv data. However, the data showed that Shanghai’s STAR and the Shenzhen Exchange are the two most active IPO markets in the world.
“People expect things to open up after the meeting, but in terms of when you’re going to see that, there’s not going to be an overnight change,” said Stephanie Tang, a partner at law firm Hogan Lovells.
“How that will play out, there’s no determinant factor, but the reasonable expectation is that we’ll see progress on deal activity from late 2022 through early 2023.”
Most economists, however, doubt that Chinese politicians will soon offer concrete signals for an easing of the zero-COVID policy or a roadmap for reopening the borders. Continue reading
COVID infections are at their highest since August and an estimated 36 cities are in lockdown or under some form of control ahead of the gathering, which begins Sunday.
Greater political certainty in areas such as technology and education may only become apparent after China’s two-year parliamentary session in March, lawyers said.
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reporting by Scott Murdoch; Editorial office of Anshuman Daga
Our standards: The Thomson Reuters Trust Principles.
Scott Murdoch
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