The chairman of the city's bourse operator said that more than a hundred applicants are in the pipeline for initial public offerings IPOs and that they are looking for more companies and investors from markets including the Middle East and Southeast Asia.
China's economic slowdown, a regulatory crackdown that has tightened scrutiny over companies' fundraising outside mainland China and geopolitical tensions have resulted in a bleak year for new listings in Hong Kong.
In recent years, anti-government protests, the imposition of a sweeping national security law and punishing COVID 19 containment measures have clouded Hong Kong's status as a premier financial centre.
Most of the IPOs in Hong Kong are due to public floats by Chinese companies, one of the biggest listing venues in the world and a major driver of revenue and fee income for the world's biggest investment banks.
The Asian financial hub has raised nearly $6 billion via 50 IPOs this year, which is down from $25 billion in 2021, Refinitiv data shows. The bourse is on course to see its lowest IPO proceeds in a decade.
The Hong Kong Exchanges and Clearing Ltd HKEX Chairman Laura Cha said in an interview at the Reuters NEXT conference that they are very confident that the IPO market activity will return very quickly in the new year.
There are over a hundred companies in the pipeline. She said that many of them are waiting for market sentiment to improve so that their valuations could be better when they come to the market.
While Cha expects Chinese companies, mostly from the new economy sector, to revive their capital raising plans in Hong Kong, HKEX is looking to attract others from elsewhere to burnish its credentials as an international platform.
There are prospective investors and issuers from the Middle East and Southeast Asia on the radar.
She said that we are trying to broaden our international footprint in terms of the products we are offering. We will make ourselves more diversified with many more international companies, and that will be our strategy. International investors account for about 42% of investments in Hong Kong's equity market, and that share is a lot higher in the derivatives market, Cha said. We are already international in nature, but we will continue to expand that. Hong Kong's economy has been badly hit by years of strict COVID restrictions, but the city has lifted most of its curbs in the last couple of months.
With COVID restrictions being removed, almost completely now, and the financial markets also performing well, I think we will be able to attract new talent into Hong Kong, Cha said.
Like the rest of Hong Kong, there was a higher attrition rate about 12 months ago, and that has come down now.