PwC: Total IPO funds raised in Hong Kong predicted to reach HK$350-400 billion in 2022

• PwC: Total IPO funds raised in Hong Kong predicted to reach HK$350-400 billion in 2022 and Hong Kong to regain its top 3 position among global IPO markets

• The Hong Kong bourse continues to evolve, with the recent announcement of new rules to create a listing regime for special purpose acquisition companies (SPACs), further expanding and diversifying the financing platform for listing.

• The New Economy and U.S.-listed Chinese enterprises are expected to remain the key drivers for listing activity on the Hong Kong Stock Exchange (HKEX) in 2022.

• As Asia’s biggest biotech fundraising hub, listing of biotech companies in Hong Kong are expected to remain active in 2022.

• More environmental, social and corporate governance (ESG)-related companies are expected to be listed on the HKEX.

PwC expects Hong Kong to regain its top 3 position by funds raised among global IPO markets in 2022. Although there are still many global political and economic uncertainties, Hong Kong is expected to see an increase in total fundraising of between HK$350 and 400 billion in 2022, driven by abundant funds and huge investment needs for corporate development.

The New Economy and Chinese enterprises listed in the U.S. will be the main drivers of listing activity. In 2021, U.S.-listed Chinese enterprises returned to Hong Kong for listing raised a total of HK$100.3 billion. Biotech listings in Hong Kong surged in 2021, making it the largest such listing platform in Asia.

There were 99 new IPOs in 2021, of which 98 were listed on Main Board. These mostly comprised retail, consumer goods & services (54%), and financial services (19%). The Main Board IPOs decreased by 33% in number of listings compared to 2020. Only one company was listed on the GEM Board in 2021, compared to eight in 2020. No companies were listed by introduction on the Main Board, while two GEM Board listing switched to the Main Board without any funds being raised.

Total funds raised by IPOs in 2021 reached HK$331.66 billion, marking a decrease of 17% from the previous year, despite the high level of activity from New Economy listings and secondary listings by US-listed Chinese enterprises.

Eddie Wong, PwC Hong Kong Capital Markets Services Partner, said: “Along with COVID-19 and increasing geopolitical and economic uncertainties, Hong Kong IPO market has also been hit by scrutiny from China targeted on certain sectors. Although the long-term is conducive to the healthy development of the economy and business, the Hong Kong IPO market will inevitably be affected in the short-term. Hong Kong ranks fourth in total funds raised among the global IPO markets. However, Hong Kong’s pipeline for IPOs remains strong. Greater investor demand and stricter regulatory requirements on climate change and sustainability will drive accelerated growth in listings for renewable energy, electric vehicles and other companies involved in sustainable innovation and ESG.”

PwC forecasts 120 IPOs in 2022, with total funds raised between HK$350 and 400 billion. This could place Hong Kong among the top 3 fundraising markets in the world in 2022. The Cross-boundary Wealth Management Connect Scheme and other related initiatives allow Hong Kong to offer greater value and more business opportunities for enterprises and investors, thereby playing an active role in establishing China’s multi-level capital markets.

Benson Wong, PwC Hong Kong Entrepreneur Group Leader, said: “Listing regulation reforms over the past ten years have successfully diversified Hong Kong IPO market. We believe these reforms could create further opportunities to strengthen Hong Kong as the best financial centre in the region. Hong Kong’s bourse is agile and continues to evolve by embracing new models. It has joined other global bourses in allowing special purpose acquisition companies (SPACs) to raise funds through IPOs. We expect around 10 to 15 SPACs to list in Hong Kong this year, raising HK$20-30 billion. 2022 will be an important year for the Hong Kong IPO market. We are confident that it will regain its place as one of the top 3 fundraising hubs in 2022.”

Looking at Mainland markets, the number of IPOs and total funds raised in 2021 increased compared to 2020: 493 new listings and RMB 547.8 billion in funds raised are increases of 25% and 17% respectively, both reaching record highs. The Shanghai Stock Exchange was one of the world’s top three IPO markets in 2021, with a total fundraising of RMB 375 billion for 249 listings, ranking it behind the Nasdaq. In 2021, 73% of A-share IPOs were issued through the registration system, accounting for 65% of funds raised. There were 199 IPOs on the Shenzhen ChiNext and 162 on the STAR market – the top two boards for listings. The STAR market accounted for the most funds raised, with RMB 206.2 billion, followed by the Shanghai main board (RMB 168.8 billion). The full implementation of the registration system will benefit the A-share market. Driven by the continuous growth in new shares on the STAR market, Shenzhen ChiNext and Beijing Stock Exchange, we expect to see a record high in fundraising in 2022.