Chinese companies considering an initial public offering (IPO) have been buoyed by the recovery in the mainland market, positive sentiment and large values in Hong Kong, as well as the successful listing of ride-hailing app Didi in New York.
It has been a buoyant few months for floating Chinese companies, with positive figures being released from the mainland and Hong Kong markets for the first half of this year. Meanwhile, the success of Didi’s initial public offering (IPO) in New York points to the benefits of listing further afield.
Hong Kong has had a good IPO year so far, and according to predictions from consultancy PwC, the financial centre is on course to raise a total of HK$500bn in 2021. The numbers of companies listing in Hong Kong, however, had declined, but the funds raised had increased compared to last year. The funds raised had increased by 129% when compared to the same period a year before. PwC notes that this increase was partly due to US-listed Chinese companies choosing to go to Hong Kong for a secondary listing.
These figures give observers reason to be optimistic about the investment sentiment for the rest of the year. “With the start of economic recovery from the effects of the COVID-19 pandemic, Hong Kong’s IPO market remained active for the first six months of 2021, with total funds raised in the first six months double that of last year. We have observed that the new-economy and US-listed Chinese enterprises remain as the main drivers for listing activities, successfully diversifying Hong Kong’s capital market and laying an important foundation for the future development of the Hong Kong IPO market. The listings activities of biotech companies in 2021 will continue to be active and Hong Kong is gradually becoming the best listing platform for biotech companies in Asia,” said Eddie Wong, PwC Hong Kong Capital Markets Services Partner, at a press briefing last week.
Meanwhile on the mainland, the market has shown signs of recovery from the pandemic for the first six months of this year. So far a total of Rmb210.9bn was raised from 245 flotations, which was an increase in the number of IPOs by 108% year on year.
There has been interest in the domestic Chinese market since the country tightened rules for listings, which initially saw a number of companies withdraw their IPO plans. There were also news reports that many companies were seeking to go to other places to list, such as Hong Kong, or further afield in New York instead.
New York has been gaining attention as a location for IPOs, and according to figures from Renaissance Capital, in the full year of 2020, China-based companies raised US$11.7bn through 30 flotations in the United States. In April this year, it was reported that a further 60 Chinese companies were planning a US offering. And according to Refinitiv, 29 companies raised a total of US$7.6bn US IPOs in the first half of this year.
One Chinese company that has gone ahead and listed in the United States is Didi, the Chinese ride-hailing app – often described as China’s answer to Uber – which has a presence in 15 markets. Last week, the company raised US$4.4bn on the New York Stock Exchange and had a valuation of US$68.5bn. However, since then – on Sunday – the company had been hit by regulatory action by authorities at home. The Cyberspace Administration of China reportedly ordered the company to remove its app from app stores, and the agency was quoted as saying, “After checks and verification, the Didi Chuxing app was found to be in serious violation of regulations in its collection and use of personal information.” The company is still able to operate – those who have already downloaded the app can continue to use it – but it is prevented from gaining new customers in China – obviously a massive blow to the company after its spirits were buoyed by its successful IPO in the United States.
