PwC predicts that the Hong Kong IPO market will gradually stabilise in 2024

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• The official implementation of ‘Chapter 18C’ will help connect specialist technology companies with international funds and promote the development of the entire technology industry.
• Hong Kong is accelerating market interconnection between ASEAN and the Middle East, which are important sources of capital for the Hong Kong stock market

Hong Kong, 2 January 2024 – IPO fundraising slowed significantly through 2023. Total fundraising in Hong Kong was HK$46.3 billion, a year-on-year decrease of 56%. PwC predicts that, despite the adverse effects of global political and economic uncertainties, capital markets will stabilise due to reductions in bearish factors and a substantial demand for corporate development financing. In addition, with the end of the rate hike cycle and the possible begin of interest rate reduction in the second quarter, capital from Europe, the United States, and the Middle East is expected to return to Asia, increasing market liquidity and improving valuations. PwC expects that total funds raised for the full year of 2024 in Hong Kong will rebound and reach over HK$100 billion.

There were 73 IPOs in 2023 – a year-on-year decrease of 19%. These mostly comprised retail, consumer goods & services (29%), followed by industrials and materials (22%), healthcare (16.5%) and information technology and telecommunications services (16.5%). Thirteen of these companies raised HK$1 billion or more in funding. Two companies were listed by introduction on the Main Board, while three GEM Board listings switched to the Main Board without any funds being raised.

H-share companies listing for the first time on the Main Board decreased from 26 in 2022 to 25 in 2023. Companies listing on the Main Board for the first time rose from 29% in 2022 to 34% in 2023. H-share listings raised more than HK$16.9 billion in 2023, accounting for 36% of total funds raised in Hong Kong, representing a year-on-year decrease of 41%.

PwC forecasts that 80 companies will be listed in Hong Kong in 2024, with total funds raised reaching over HK$100 billion, and for Hong Kong to return to the top three global financing markets in 2024. The implementation of the new Chapter 18C listing regime will help connect specialist technology companies with international funds, bringing new opportunities to technology companies and the Hong Kong stock market, further promoting the long-term development of the entire technology industry. At the same time, the Stock Connect mechanism holds great potential, particularly with the anticipated further expansion. This will strengthen the investor base of the Hong Kong and the Chinese mainland market and enhance liquidity and valuations. The Hong Kong Government and other stakeholders are also committed to reforming and improving listing regulations. Other reforms, include the GEM and FINI platform and active efforts to seek cooperation with the Middle East and ASEAN, will gradually yield results. These will contribute to a more diversified Hong Kong IPO market.

Benson Wong, PwC Hong Kong Entrepreneur Group Leader, said: “Specialist technology companies in fields such as semiconductors and artificial intelligence (AI) have great potential and have attracted attention from the market. With interest rate divergence, the listing of Chinese concept stocks and technology companies (in the form of specialist technology companies) in Hong Kong after a valuation rebound will contribute to the stability of the capital market and boost market confidence. We are optimistic about Hong Kong's stock market this year. We expect three to five specialist technology companies will list in Hong Kong through Chapter 18C in 2024. Traditional sectors, including industrial and retail, should not be overlooked and are expected to continue to dominate. The influx of Chinese mainland companies establishing or expanding their presence in Hong Kong, coupled with the increasing demand from international funds to allocate into RMB assets, means that there will be greater interconnection between the Hong Kong and Chinese mainland markets. The further expansion of Stock Connect will help promote Hong Kong as a centre for RMB asset risk management and solidify its position as a global offshore RMB business hub.”

Eddie Wong, PwC Hong Kong Capital Markets Services Partner, said: “The Hong Kong Stock Exchange officially to reposition GEM will enhance its attractiveness. Small and medium-sized enterprises (SMEs) are an important driving force in promoting Hong Kong's economic prosperity. This initiative will help SMEs to seek capital to drive growth, sustain innovation and create value. Hong Kong is also building market interconnection between ASEAN and the Middle East. The Hong Kong Stock Exchange has included the stock exchanges of Saudi Arabia and Indonesia to its list of recognised stock exchanges, attracting Middle Eastern and ASEAN listed companies to conduct secondary listings in Hong Kong, as well as promoting cross-border listing of enterprises and regional financial cooperation. This provides ASEAN and Middle Eastern enterprises with opportunities to access a wider range of regional and global investors and with a platform to drive business growth and increase market visibility. It will also further enrich the product ecosystem of the Hong Kong Exchange, provide Hong Kong investors with a wider range of investment opportunities and consolidate Hong Kong’s status as an international financial centre.”

Looking at the Chinese mainland markets, the number of A-share IPOs slowed in 2023. There were 313 new listings and RMB356.4 billion in total funds raised, a decrease of 26% and 39% respectively on the previous year. While A-share IPOs and financing decreased year-on-year, the Shanghai and Shenzhen Stock Exchanges still rank first and second in the world respectively in terms of fundraising. In 2023, 103 IPOs were issued, with total fundraising of RMB 193.7 billion on the Shanghai Stock Exchange, while 133 IPOs were issued, with total fundraising of RMB 148.1 billion, on the Shenzhen Stock Exchange. The Beijing Stock Exchange has entered a period of rapid development, with 77 IPOs and RMB 14.6 billion of fundraising.

With the slowing development of global capital markets, IPO applications on the Shanghai, Shenzhen, and Beijing stock exchanges continue to rise. With the steady promotion of the comprehensive registration system, Chinese capital markets will demonstrate increasing vitality. 2024 is a crucial year for implementing a series of requirements put forward by the Central Financial Work Conference, such as accelerating the construction of a strong financial system and promoting the deepening and implementation of the stock issuance and registration system. PwC predicts 200-240 A-share IPOs for the full year and fundraising of RMB 160-190 billion.