Hong Kong will compete with New York for the global IPO crown
When Jack Ma, the founder of Alibaba, recently criticized Hong Kong's stock market listing regulations for outdated listings, he hit Hong Kong's sore spots.
Since Jack Ma chose the U.S. as the listing location for his e-commerce group two years ago, the competitive relationship between Hong Kong and New York has intensified.
In 2017, as three Chinese technology companies face the same choices as Jack Ma, the battle between the world's two largest Shanghai city centers will only become more intense.
According to Dealogic data, New York slightly outperformed Hong Kong in the global IPO rankings in 2016, and the total IPO transactions conducted on the New York Stock Exchange (NYSE) and Nasdaq (Nasdaq) reached US$24.6 billion. Slightly higher than the Hong Kong Stock Exchange’s US$24.5 billion, the Shanghai Stock Exchange ranked third with a scale of approximately US$16 billion.
Tokyo and Copenhagen ranked fourth and fifth respectively, with IPO transactions of US$9.6 billion and US$5.9 billion respectively. London fell to eighth with an IPO transaction value of $5.5 billion. But these figures are much lower than in 2015. Globally, the total value of IPOs in 2016 was US$141 billion, a decrease of one-third from 2015 and the weakest level since 2012.
Phil Drury, head of Citigroup’s European, Middle East, and African capital market initiation business team explained: “In 12 months, the IPO market has 6 months to be affected by macro events and actually Up closures — China’s growth concerns, Brexit, and the US election — are very rare. But I think that by the end of 2017, when we look back at the whole year, we will find that the IPO market is very strong.”
The hope for improvement depends to a large extent on the technology industry. The company leading the IPO in 2017 will be the instant messaging app Snap, which went public in New York as early as March.
Bankers will seek to make Japan Line’s listing in July last year repeat itself successfully. Line is a competitor of WhatsApp. The company withstood the market volatility after Brexit and raised $1.3 billion, and its stock price soared on the first day of trading in Tokyo and New York.
Snap’s target valuation is between US$20 billion and US$25 billion, making it one of the largest IPOs in recent years. If it succeeds in going public, it may also encourage other so-called technology "unicorn" companies (private companies with a valuation of at least $1 billion) to consider taking a risk.
Anthony Kontoleon, Global Head of Credit Suisse's Equity Capital Markets Investment Services Team, said: “2017 will be the year of rebound.” He believes that the stock market rise at the end of 2016 will be a new one. Provide momentum for the year. He said: "The industries with the longest IPO backlog appear to be technology, retail/consumption and energy."
In addition to Snap, people are also very interested in the possible listing of three Chinese technology groups: Alibaba's payment company Ant Financial, and the online financial platform Lufax created by Ping An. , And ZhongAn Insurance (ZhongAn), an internet insurance company backed by Ping An, Alibaba and its rival Tencent.
All three companies are considering fundraising options, including where to go public. The valuations of Ant Financial, Lufax and ZhongAn Insurance in several rounds of fundraising in the past two years are US$60 billion, US$19 billion and US$8 billion, respectively.
If it is listed in Shanghai or Shenzhen, the valuation is likely to be higher than that in Hong Kong. However, according to the IPO issuance sequence controlled by the Chinese regulator, it is estimated that it will take at least 18 months to complete the listing.
Listing in Hong Kong can gain some local advantages while allowing companies to raise funds outside of China’s tightening capital controls. However, compared with New York, Hong Kong has few technology stocks as a benchmark, and listed companies are not allowed to adopt a two-tier shareholding structure.
Nick Johnson, head of Asia Pacific Equity Capital Markets at JPMorgan, said: “They are giants in their respective fields. They have global appeal. They will succeed under the Hong Kong model. Over time, they I hope to integrate China into the rest of the world-allowing foreign investment to enter is part of this effort."
However, in the record of Hong Kong IPOs, it is inevitable that some companies have performed poorly.
Postal Savings Bank of China became the world’s largest IPO in 2016, raising US$7.4 billion in September last year, but its share price has almost never been higher than the issue price since it went public, and its share price is now 10% lower than the issue price. .
The sluggish performance of Meitu's listing in Hong Kong last month also shows that bankers seeking to attract companies such as Ant Financial and Lufax to list in Hong Kong are facing greater challenges.
As the software manufacturer of China's "selfie" photo enhancement app, Meitu raised US$629 million and became Hong Kong's largest technology company IPO in many years. However, its issue price is at the bottom of the target price range and has not risen but fallen since its listing.
A stock expert who was not involved in the transaction admitted: "We are all disappointed-we all hoped that Meitu would perform better."
But U.S. bankers are optimistic about the improvement in IPO transactions, on the grounds that they are not afraid of other companies that went public in the turbulent market in 2016.
According to Dealogic's data, the stock prices of new U.S. stocks listed in 2016 have risen by an average of about 20% by the end of the year, while new stocks listed in 2015 have fallen by more than 6% at the end of the year.
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Liz Myers, head of global equity capital markets at JPMorgan Chase, argued: “This positive performance not only encourages investors and newly listed companies to enter the market in 2017, but also raises additional funds for growth and secondary The market reduction sets a positive background."