The outlook for Hong Kong's initial public offering (IPO) market is expected to brighten next year on the back of lower interest rates and stronger regulatory support, according to deal makers.
IPO volume in the city could rise by 70 per cent to HK$150 billion (US$19.3 billion), from HK$87.6 billion this year, according to a forecast by Deloitte, which has been collating the city's IPO data since 2011. Chinese companies' secondary listings will contribute a significant portion next year, building on a recent pickup in such deals.
"The overall IPO market sentiment in 2025 should improve for several reasons," said John Lee Chen-kwok, vice-chairman and co-head of Asia coverage at UBS. He pointed to the continued easing of the interest rate cycle as conducive for the equity markets, and the strong support from regulators regarding listing reforms and encouraging mainland China A-share companies to go for H-share listing in Hong Kong.
Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.
The Swiss investment bank topped the Hong Kong IPO bookrunners' league table among international banks this year with a market share of 6.75 per cent, according to data from the London Stock Exchange Group.
John Lee, vice-chairman and co-head of Asia coverage at UBS. Photo: Jonathan Wong alt=John Lee, vice-chairman and co-head of Asia coverage at UBS. Photo: Jonathan Wong>
"The A-share listed companies already have an existing shareholder base," said Lee. "From a listing perspective in Hong Kong, it will be less complicated than unlisted companies."
He added that the A-to-H theme could account for about 40 to 50 per cent of the total first-time stock offerings in the city next year.
Kenneth Chow, Citigroup's Asia head of equity capital markets origination and products, echoed the sentiment, saying that the A-to-H theme would be big as the authorities have streamlined the approval process to make the listing timetable more predictable.
(L to R) Katherine Ng, HKEX's head of listing; Wilfred Yiu, HKEX's deputy CEO, co-chief operating officer and co-head of markets; Alpha Lau, director general of investment promotion at InvestHK; Bonnie Chan Yiting, HKEX CEO; Shan Jizhang, co-founder and CEO of Black Sesame International Holding; Liu Weihong, co-founder and president of Black Sesame; Financial Secretary Paul Chan Mo-po; Carlson Tong Ka-shing, HKEX chairman, and Dong Sun, Secretary for Innovation, Technology and Industry, at the Black Sesame International Holdings Limited's listing ceremony at the HKEX on 8 August 2024. Photo: Jonathan Wong alt=(L to R) Katherine Ng, HKEX's head of listing; Wilfred Yiu, HKEX's deputy CEO, co-chief operating officer and co-head of markets; Alpha Lau, director general of investment promotion at InvestHK; Bonnie Chan Yiting, HKEX CEO; Shan Jizhang, co-founder and CEO of Black Sesame International Holding; Liu Weihong, co-founder and president of Black Sesame; Financial Secretary Paul Chan Mo-po; Carlson Tong Ka-shing, HKEX chairman, and Dong Sun, Secretary for Innovation, Technology and Industry, at the Black Sesame International Holdings Limited's listing ceremony at the HKEX on 8 August 2024. Photo: Jonathan Wong>
The reform was followed by an HKEX public consultation earlier this month to optimise IPO price discovery and increase flexibility for IPO issuers.
Shenzhen-listed Contemporary Amperex Technology Limited, China's largest producer of batteries for electric vehicles, was reportedly considering a listing in Hong Kong that could raise at least US$5 billion. Shanghai-listed drug maker Jiangsu Hengrui Pharmaceuticals confirmed a Hong Kong listing plan, with Bloomberg reporting the share sale to be at least US$2 billion.
These companies align with the sectors, such as technology and healthcare, that deal makers said would do well in the city's IPO market. Companies in other areas, such as consumer, industrial and financial services, should also thrive.
A staff prepares bubble tea at a Guming shop. Photo: Guming alt=A staff prepares bubble tea at a Guming shop. Photo: Guming>
"China's economic outlook is on the path of recovery," said Lee. "We have seen a clear indication in the government's focus on economic growth since September."
A series of China policy measures has strengthened the investors' confidence in Chinese companies.
"Investors have gone from being very underweight on China or in a defensive portfolio to a more equal-weight and balanced China portfolio," Chow said while noting that some investors are still on the sidelines because they want to see the Chinese government deliver more fiscal stimulus.
Wu Qing, chairman of the China Securities Regulatory Commission, during the Global Financial Leaders' Investment Summit at the Grand Hyatt hotel in Wan Chai on 19 November 2024. Photo: Dickson Lee alt=Wu Qing, chairman of the China Securities Regulatory Commission, during the Global Financial Leaders' Investment Summit at the Grand Hyatt hotel in Wan Chai on 19 November 2024. Photo: Dickson Lee>
Next year, the capital market participants will closely watch the interest rate decisions.
The US Federal Reserve expected slower interest rate reductions as it grappled with the potential inflationary impact of president-elect Donald Trump's promises of higher tariffs, tax cuts and stricter immigration policy.
"The new US government, in my view, will strike a balance between tariffs and the economy, which should have a moderate impact on inflation," said UBS' Lee.
US president-elect Donald Trump gestures at Turning Point USA's AmericaFest in Phoenix, Arizona on December 22, 2024. Photo: Reuters alt=US president-elect Donald Trump gestures at Turning Point USA's AmericaFest in Phoenix, Arizona on December 22, 2024. Photo: Reuters>
"The slower-than-expected pace of rate cuts has not hit the equity market as much as people feared," Citigroup's Chow said. The S&P 500 Index and Hang Seng Index have climbed nearly 26 per cent and 20 per cent, respectively, this year.
However, the Trump administration's impact on geopolitics globally could be a bigger issue.
"Next year, the biggest unknown will be the actions taken by the new Trump administration and how they will translate from a geopolitical perspective," said Lee. "The results of these will start showing in the second and third quarters."
