Sat, 13 Aug 2022

HONG KONG: After witnessing a flurry of activity last year and at the start of this year, Hong Kong's market for new stock listings has cooled to its slowest pace since 2009 in the wake of increasing Chinese scrutiny of tech firms' anti-competitive business practices.

According to data compiled by Bloomberg News, just seven companies have gone public in the second quarter of this year, the lowest figure since the aftermath of the global financial crisis.

First-day performances of IPOs have also taken a hit, with the initial public offerings of warehouse and distribution company JD Logistics and property manager Central China Management in May showing the worst average debut performance in 15 months, data shows.

With China imposing a steep fine on Alibaba Group Holding and ordering 34 of its largest tech companies to amend any alleged anti-trust practices, firms have grown wary of going public. Investor appetite for new listings has cooled, too.

"Investors are no longer comfortable paying sky-high valuations for some companiesBecause of the intervention of the government, some issuers will have to revise down their multiples," said Louis Tse, Hong Kong-based managing director at Wealthy Securities.

Concerns over rising inflation are also making it difficult for tech firms to go public, with investors dumping shares with high valuations.

"We have seen some volatility and that has reflected on investors' appetite, but deals that are priced appropriately will get done," said Francesco Lavatelli, head of equity capital markets for the Asia Pacific region at JPMorgan Chase.

Investors are now closely watching some upcoming listings, including China Youran Dairy Group, Angelalign Technology, CARsgen Therapeutics Holdings, and Chinese gaming giant NetEase's music streaming arm, for cues.

"The market needs at least two or three blockbuster IPOs to revive the sentiment. That means you need both subscription ratio and first-day performance to surprise the market on the upside," said Kenny Wen, a strategist with Everbright Sun Hung Kai.

"The good days of the IPO market are not coming back yet," he added.

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