Hong Kong queue of IPO hopefuls faces market reckoning
By Julia Fioretti HONG KONG (Reuters) - The number of companies filing to go public in Hong Kong has jumped almost threefold this year, driven in part by China's burgeoning technology sector, but they will have to contend with weaker markets which could hurt deals.
By Julia Fioretti
HONG KONG (Reuters) - The number of companies filing to go public in Hong Kong has jumped almost threefold this year, driven in part by China's burgeoning technology sector, but they will have to contend with weaker markets which could hurt deals.
Hong Kong is on track for a bumper year of initial public offerings (IPOs), spurred by a market rally late last year and listing reforms designed to attract high-growth technology and biotechnology companies.
So far this year 214 companies have filed with the Hong Kong stock exchange, up 170 percent from last year when only 79 submitted applications, according to Thomson Reuters data.
The financial hub also overtook New York in IPO volumes, with $27.7 billion raised so far this year, the data showed.
"There's a lot more that got started than will get finished," said Stephen Peepels, head of U.S. Securities, Asia Pacific for law firm Hogan Lovells. "There's probably not enough investor demand to take on all the IPOs that have been announced during 2018."
The huge spike in companies wanting to go public is also due to the nature of the businesses, which tend to be younger, fast-growing and in need of cash - especially from China - marking a change from the years when the main IPOs in Hong Kong were done by Chinese state-owned enterprises.
However bankers expect some of them could choose to raise money privately instead, putting off IPO plans as long as markets remain difficult.
"You'll likely see some smaller transactions push out their timetable a bit," said Sunil Dhupelia, Head of Equity Syndicate, Asia ex-Japan at Credit Suisse
Across Asia, companies have raised $70.5 billion in IPOs in the first three quarters of 2018, up 23 percent from the same period last year and the highest since 2014.
But performance has been patchy in Hong Kong, with some of the bigger deals still trading below their IPO price, such as smartphone maker Xiaomi <1810.HK>, which went public in July in the world's biggest tech float in four years.
"Investing in Hong Kong IPOs has not driven investor returns in the past 6-7 months which has contributed to the general sentiment and valuation sensitivity," said Finlay Wright, Director, Equity Capital Markets at Rothschild Global Advisory. "It feels like it would only take a few deals not succeeding to damage confidence and hit the rest of that pipeline."
Weak markets amid global trade tensions - which have hit emerging markets particularly hard - have weighed on many deals, making investors more selective.
"When markets are falling, many investors would choose not to participate in IPOs as the company's stock prices are more likely to fall below IPO prices once it starts trading," said Jian Shi Cortesi, portfolio manager of Asian equities for GAM investments.
Volvo Cars and its Chinese owner Geely <0175.HK> earlier this month postponed plans to float shares in the Swedish carmaker because of Sino-U.S. trade tensions and a downturn in automotive stocks.
However companies from the region are still lining up to go public - from Chinese movie ticketing app Maoyan Weying to Tencent Music, the music streaming company owned by Chinese tech giant Tencent Holdings <0700.HK>.
Last week, Chinese online food delivery-to-ticketing services firm Meituan Dianping <3690.HK> gained about 5 percent on its Hong Kong debut, sending a positive signal to other companies in the pipeline, although it was last trading below its IPO price.
"The buy side wants access to China. They want access to the consumer," said Aaron Arth, Head of Financing Group for Asia ex-Japan at Goldman Sachs
"While some of these deals could be performing better, most investors would say over the long term, these companies will show growth and value creation."
Goldman topped the league table for equity raising in the region, followed by Morgan Stanley
(Reporting by Julia Fioretti; Editing by Stephen Coates)
This story has not been edited by Firstpost staff and is generated by auto-feed.
By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States
BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.