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Jun 24, 2019

Capital raised from China-Hong Kong cross-border IPOs falls in first half of 2019

Number of IPOs overall also falls by 33 percent

The legacy of 2018’s stellar performance in Asia-Pacific, which was mostly driven by an uptick in high-value Chinese cross-border deals into Hong Kong, has cast a shadow over activity in the region in the first half of 2019.

Both the amount of capital raised and the number of IPOs overall fell in the first six months of this year, down by 40 percent to $24.3 bn and 33 percent to 305 on the same period in 2018, according to data compiled by global law firm Baker McKenzie.

While cross-border value was down 41 percent, Asia delivered the same number of IPOs – 50 – showcasing the direct result of the drop in value of IPOs from China. When taking this into account, cross-border activity in Asia has actually performed relatively well, surpassing capital-raising in both 2016 and 2017.

Domestic activity is the main reason behind such a sharp drop in IPO value and numbers, with some stock exchanges experiencing unusual declines in listings. India saw a 70 percent fall in listings to only 35 IPOs from 115 in the same period last year.

The Indian national elections in April were said to be behind this disruption. There are, however, renewed hopes for the Indian market for the remainder of the year as Prime Minister Narendra Modi’s re-election has reignited investor sentiment in the country.

Australia saw a 32 percent drop in listings this year as state and federal elections, the regulatory fallout of the Financial Services Royal Commission’s report into financial services misconduct and underwhelming share price performances tested market confidence.

Japan was one of the few Asian countries that saw increased activity, as investors enjoyed a stable economy and the re-election of Shinzo Abe saw a boost in market confidence. All 37 Japanese listings were domestic.

Ivy Wong, Baker McKenzie’s head of Asia-Pacific capital markets, comments: ‘While there will always be an appetite to tap into foreign investor pools, China’s new Innovation Board is set to encourage more companies to list domestically and we could begin to see a real shake-up in the market when it comes to Chinese IPOs – particularly given the positive sentiment toward Hong Kong’s regulation changes last year.’