A revival of the IPO market in Hong Kong is emerging due to favorable interest rate prospects and an easing of China policy

“The idea of ​​a 'good' IPO market goes beyond short-term and unexpected stock price performance,” Wang said. Hong Kong's promise remains unbroken, he added.

ZJLD Chairman Wu Xiangdong (right) and senior employee Su Shuming attend a gong striking ceremony to mark the company's trading debut on April 27, 2023 in Hong Kong. Photo: Handout Exchanges and Clearing in Hong KongAccording to Refinitiv data released on Friday, the main board of directors (HKEX) fell to 8th place in the global IPO table this year, its lowest level since 2001, when it was ranked 14th. The city last topped the league in 2019 with 144 IPOs that raised $40 billion.

The city fell behind Shenzhen's ChiNext, Shanghai's Star Market and its main exchange, Nasdaq and New York Stock Exchange in the US, Bombay Stock Exchange and National Stock Exchange in India, but ahead of Abu Dhabi Securities Exchange, Indonesia Stock Exchange and Singapore Exchange.

Overall fundraising collapsed globally this year as rising interest rates dampened sentiment. The total fell 26.7 percent to $119 billion, according to data compiled by Refinitiv from 104 markets worldwide.

On ChiNext, the main IPO market, 110 companies raised $17.1 billion, but the value was 31 percent below the 2022 value.

Hong Kong listings increased in the fourth quarter. 25 companies raised $2.6 billion in the period, compared with $1 billion in the third quarter, $1.4 billion in the second quarter and $850 million in the first quarter.

Wong said ZJLD made the right decision to go public in Hong Kong to strengthen the company's reputation, highlighting the city's unique position as a gateway between mainland China and the world, as well as its broad international investor base.

ZJLD, headquartered in Beijing, was founded two decades ago by its chairman Wu Xiangdong and is backed by U.S. private equity giant KKR & Co. The Chinese spirits maker has several brands in its portfolio, including Li Du and Xiang Jiao. His flagship is Zhen Jiu or Treasure of Liquor.

“ZJLD strives to achieve the status of a Chinese spirits group with a wide range of spirits and brands with international influence through sustainable and continuous development, similar to industry leaders such as Diageo and Pernod Ricard,” Wang said.

Investment bankers blamed higher interest rates for the poor global IPO sentiment. As a result of the US key interest rate increase of 5.25 percentage points since 2022 to curb inflation, money flowed into US dollar assets as investors shifted their money from stocks into high-yield, risk-free bank deposits.

“The weak IPO market in 2023 reflects the uncertain macroeconomic outlook for mainland China,” said John Lee Chen-kwok, vice chairman and co-head of Asia country coverage at UBS. Many IPO candidates are waiting for market conditions to improve, he added.

However, Lee is optimistic about the prospects for 2024, citing the HKEX's numerous reforms to promote IPOs and encourage international companies to list here.

Since April, the HKEX has allowed large technology companies to list ahead of revenue, while their CEO Nicholas Aguzin has promoted international listings, including establishing offices in new York in June and London in September, parallel to roadshows in the Middle East and Southeast Asia.

“However, all these reforms will not work if the overall sentiment does not improve,” said Edmond Hui Yik-bun, CEO of Bright Smart Securities, one of the largest local brokers.

“As the benchmark Hang Seng Index has fallen by almost half since its peak and trading [near] At the lowest level in 25 years, many investors have lost money. They have no money left to invest in IPOs,” Hui said.

The Hang Seng Index fell almost 14 percent this year. This is the first time the benchmark is available fallen four years in a row. It lost 15 percent in 2022, 14 percent in 2021 and 3.4 percent in 2020.

Kenny Ng Lai-yin, strategist at Everbright Securities International, is optimistic. He expects the US to start cutting interest rates next year and that Beijing will bolster market sentiment with supportive measures.

“These two factors will serve as important catalysts for the IPO market,” Ng said.

There is more than 90 IPO applications in Hong Kong in the pipeline, with some potential blockbuster listings next year, according to data from the Hong Kong Stock Exchange.

Deloitte expects the Hong Kong IPO market to see significant improvement in 2024. A total of 80 IPOs are expected to raise HK$100 billion, according to Edward Au, southern region managing partner at Deloitte China.

Shenzhen-listed SF Holding, the parent company of courier service provider SF Express, could raise up to $3.3 billion in Hong Kong, brokers estimate.

Two other candidates – Cainiao Smart Logistics Networkowned by Alibaba Group Holding, the post office's parent company, and Midea Groupthe world's largest home appliance maker, is expected to raise $1 billion each.

“Market expectations that the interest rate hike cycle will end in the first half of 2024 are setting the stage for a recovery in Hong Kong IPO activity,” Au said. “Redirection of liquidity, including funds from Europe, the US and the Middle East, to Asia is expected.”

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Other market participants such as Stacey Wong generally agree with the assessment.

The only problem, according to the president of the Association of Hong Kong Capital Market Practitioners, is geopolitics, which could prove to be an important factor.

Meanwhile, ZJLD's Wang believes business leaders could help investors regain confidence.

“It is our responsibility as business managers, policymakers and industry professionals to lay a solid foundation for rebuilding that faith,” he said.

“Only by leveraging our collective power as a company at this time can we fundamentally contribute to the overall improvement of the overall environment and reaffirm Hong Kong as a favorable IPO market.”