Gordon Crosbie-Walsh

The View | Why an IPO recovery would mean so much to Hong Kong

It would bring back the ‘feel good’ factor, encourage wealth creation and risk-taking, and multiply capital for innovative Chinese firms

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Following early signs of recovery, more IPOs are expected to launch at the Hong Kong stock exchange this year. Photo: Edmond So

Gordon Crosbie-Walsh

Published: 9:30am, 28 Jul 2024

After a disappointing few years for initial public offerings (IPOs) in Hong Kong, there are some early signs of a revival. Six listings in the week of July 8 made for the year’s busiest week of IPOs. Including one more so far, at least seven companies – from sectors including artificial intelligence, healthcare, ride-hailing, oil refining and aircraft manufacturing – have made their trading debut.

Headwinds remain but optimists believe there is an upside to Hong Kong’s once-robust IPO market: the city ranked 13th among global equity markets for IPO proceeds in the first half of this year with the smallest amount raised in 20 years.

Every financial centre covets IPOs, but a healthy stream of listings would have a particularly significant impact here in Hong Kong. Of course, it would boost trading volumes on the exchange and create wealth for the founders of and early investors in the newly listed companies. But the recovery of the IPO market would have further-reaching consequences.

It would drive the local economy by supporting the return of upside risk takers and the city’s established wealth-creation dynamics. It would also have a multiplier effect on the availability of local and global capital for innovative Chinese companies by allowing venture capital and private equity investors to redeploy capital to new investments.

And liquidity begets liquidity: more listed stocks would mean more assets that can be used by shareholders to secure financing for purposes such as investment in new ventures and refinancing expensive corporate debt.

Hong Kong’s economy – and the confidence of its corporations and investors – are closely connected to the fortunes of the stock market and IPOs in particular. Historically, new listings, a positive performance trend for local stocks and the property market have been key drivers of wealth creation in a city where 48 per cent of people invest directly in stocks and 53.8 per cent own property.