Hong Kong IPO is "tepid"?
Recently, Square rose 45% on the first day of trading in New York. The online payment group's response was flat-at least in public. The company's "burst" gains on the first day of trading ranked only 5th among all US initial public offerings (IPOs) since last year, and 27th in the past 5 years.
But if a Hong Kong IPO's single-day increase reaches Square's level, it will be really eye-catching. In the Hong Kong market, the first day of trading is so rare that China Huarong Asset Management, which rose 0.32% from the offer price on the first day of trading, has entered the top ten of the first day of trading in Hong Kong.
In March last year, when the Chinese stock market rose rapidly, the mainland brokerage GF Securities soared 35% on the first day of listing, setting the highest increase in Hong Kong’s first trading day since last year, but even this increase is far behind. Square.
However, despite the lack of enthusiasm, Hong Kong is still about to take back the crown of IPO funding from New York, which will be the first time since 2011. According to Dealogic data, since last year, newly listed companies on the Hong Kong Stock Exchange have raised nearly US$30 billion, while the New York Stock Exchange and Nasdaq have raised US$19.6 billion and 175 million, respectively. One hundred million U.S. dollars.
The financial industry accounts for about 60%
While the total amount of funds raised ranked first, the issuer structure of the amount of IPO funds raised by the Hong Kong Stock Exchange has also changed.
From January to October last year, among the issuers listed on the Hong Kong Stock Exchange, the financial industry’s initial public offerings accounted for 58.3% of the total IPO funds raised. It is closely followed by the consumer goods manufacturing industry, which accounts for 13.4%. The third and fourth places are integrated companies and information technology companies.
The data from January to February last year showed that consumer services, consumer goods manufacturing and financial industries accounted for the highest proportion of IPO funds at that time, with 31.9%, 28.2% and 23.4% respectively. Since March and April, the proportion of financial public funds raised has reached as high as 59%.
Low return on investment
Although Hong Kong has regained the crown of the largest IPO market, for investors, investing in new shares in the Hong Kong market may not necessarily be a good return.
According to Dealogic's data, last year only three companies with an IPO size of more than US$500 million rose more than 5% on the first day of trading. In addition, two-thirds of companies with an IPO size of more than US$500 million are currently stock prices below the issue price.
Other exchanges in Asia have no shortage of bright spots. Last year, the Tokyo stock market ushered in some of the world's highest IPO transactions. Among them, the listing of Japan Post and its two financial subsidiaries raised a total of 12 billion U.S. dollars.
And when other markets experienced substantial turbulence, the Hong Kong stock market was not immune. The Hang Seng Index once rose to a 52-week high in April. However, in the global stock market crash in August last year, the Hang Seng Index fell sharply, with a drop of more than 5% at one time.
Insufficient flexibility in Hong Kong
For investors and bankers who bring companies to the market, flexibility is a major advantage of New York. American bankers can set the IPO price below the initial price range if they feel that the uncertainty in market conditions and investor interest allows. In contrast, Hong Kong’s rules mean that once a company sells to the public, the original price range cannot be changed. In Square's IPO, bankers can set the IPO price at $9 per share, which is much lower than their original price range of $11 to $13.
"You may receive an order like this in New York. For example, someone would say, (for each share) 9 US dollars, I want to buy 10 million US dollars, and I can accept 10 US dollars-so the subscription form really reflects the market purchase Willing, this is different from Hong Kong," said a senior banker in Hong Kong.
Another reason why the stock price rose significantly higher on the first day of IPO in New York than in Hong Kong is that among Chinese state-owned enterprises seeking to list in Hong Kong to raise funds, the mentality of relying on "friends and relatives" is widespread. Because of this mentality, they will raise funds from other state-owned enterprises. .
These friendly funders provide support as cornerstone investors whose purchased shares cannot be sold within 6 months after the stock is listed. They placed orders in advance to help fund-raising companies that are also state-owned enterprises succeed in their IPOs. However, they are usually driven by strategy rather than valuation. This allows later investors to have less room to bargain.
For example, when Huarong raised US$2.3 billion in its IPO in October last year, the subscription ratio of cornerstone investors reached a record 70%. Huarong hired 24 banks to take care of its IPO, and this number also set a global record.
Bankers said that Hong Kong IPO participants are composed of multiple groups with different interests and appeals, which makes the situation even more difficult. “In the United States, IPO participants are all institutions; here, IPO participants are a hodgepodge: institutions, retail investors, state-owned enterprises, high-net-worth individuals, everything,” said a professional who has been immersed in the Hong Kong stock market for a long time. However, although Hong Kong cannot match New York in terms of pricing flexibility and investor sophistication, the lower first-day increase in Hong Kong’s listing means at least that it is the listed companies that get more value here than in the U.S. investor.
New research supports this, at least for companies within a certain range. A report published by the Macquarie University School of Management (MGSM) in Australia shows that in Hong Kong, companies with a market value of between US$1 billion and approximately US$3.5 billion have an average increase of 3.8% on the first day of listing, compared to 17.3% in the United States.
Researchers chose to look at companies within this range because they include large companies, but not companies that will be included in the S&P 500—becoming a constituent of the index will bring Extra attention. Companies like Square and most noteworthy companies listed in Hong Kong last year are also included in this scope.
Alex Frino, dean of Macquarie University’s School of Management and author of the aforementioned report, said that the results of the study show that companies within this range may be more suitable for companies in Hong Kong and other less deep ones. Market listing.
"If you are not a S&P 500 index company, you may not get attention in the United States," Professor Fohino said. "In the United States, these companies are called small-cap stocks-but in other regions, they may It's the large-cap stocks."
At present, there is only one huge IPO in Hong Kong, namely Postal Savings Bank. The reason why the above-mentioned small and medium-sized companies should choose to list in Hong Kong should at least provide some peddlers to the complaining Hong Kong banking industry. good news.