Hong Kong's IPO Market reaches Historical High in terms of Total Proceeds for Q1 2021, finds KPMG Analysis

Hong Kong's IPO market continued its strong momentum from the second half of last year, achieving a historic high in Q1 2021, with total funds raised hitting USD13.9 billion, according to KPMG's latest analysis.

The Shanghai Stock Exchange also ranked among the top 5 stock exchanges with USD6.9 billion in IPO proceeds recorded, KPMG said in a press release.

The analysis, from KPMG's “2021 Q1 review of Mainland China and Hong Kong IPO markets”, shows that total funds raised globally more than tripled compared with the same period last year. The US, Hong Kong and China's A-share markets continue to take the lead, raising a combined total of USD61.4 billion, representing over 63% of the global total.

Paul Lau, Partner, Head of Capital Markets, KPMG China, said: “As Covid-19 vaccines become more readily available globally in 2021, a resurgence of the global economy is expected. Low interest rates, a high level of market liquidity, and solid investor sentiment remain. As such, we are expecting another active year of IPOs globally.”

While funds raised through special purpose acquisition companies (SPACs) are not included in the global traditional IPO tally, the analysis finds that SPACs also continued to be popular in Q1 2021, with a record breaking USD95.6 billion raised.

On the back of a strong recovery by China's domestic economy and the implementation of registration-based listing platforms, the A-share IPO market remained active during the first quarter of the year. The STAR Market continued to make its mark with 35 deals, raising a total of RMB 33.2 billion. Thirty-three deals were completed under the ChiNext reform, which focuses on serving innovative growth companies and start-ups, raising a total of RMB 19.0 billion.

The listing pipeline in Mainland China bourses remains active with over 700 active applicants, most of which relate to the STAR Market and the ChiNext board, a testament to the solid market confidence in and recognition of those boards.

In terms of sectors, the listing momentum of TMT and industrials companies prevailed, as the digital economy and advanced industrials further expand in China. Advanced industrials, TMT and life sciences dominated the STAR/ ChiNext pipeline, representing 88% of the listing applications in the first quarter.

Louis Lau, Partner, Capital Markets Advisory Group, KPMG China, said: “Looking forward, the new 'Dual Circulation' economic strategy places the domestic market as the mainstay for China's future growth, which benefits innovation sectors such as applied technology firms. At the same time, the quality of listings remains a focus for the regulators, as part of their continuous efforts to enhance the quality of the capital markets for high-quality economic development.”

Driven by strong liquidity, investor demand has remained solid this quarter. Three sizeable Chinese technology company listings in Hong Kong raised a total of HKD92.4 billion, representing 70% of total funds raised during the quarter.

With the growing number of completed secondary deals in recent years, the Hong Kong bourse is viewed as an attractive option in terms of a listing venue for homecoming listings by US-listed Chinese-based companies. Three secondary listings were completed during the quarter, raising HKD49.5 billion in total and additional listed Chinese companies are expected to follow suit.

In addition, Hong Kong has again proven to be a popular choice among innovation companies, as we see more successful listings of pre-revenue BioTech, weighted voting rights (WVR) and secondary listing companies, contributing to 7 out of the top 10 listings in the city in Q1 2021.

Irene Chu, Partner, Head of New Economy and Life Sciences, Hong Kong, KPMG China, said: “Benefitting from the new listing chapter, the investment ecosystem has been evolving for biotech companies and Hong Kong has become the second largest and a leading biotech fundraising hub globally. Moreover, Mainland China's continuous effort focusing on the development of strategic emerging industries creates greater need for capital investments for biotech, advanced technology and new energy companies.”