China’s regulatory crackdown on some of its biggest industries is having a knock-on effect on the post-listing performance of Hong Kong’s initial public offerings.
Shares of firms that have gone public in the financial hub this year have climbed just 4% from their offer prices on average, according to data compiled by Bloomberg on companies that raised at least US$50 million. The gains are much smaller when compared to those seen in India and South Korea, and even Thailand.
This marks a sharp reversal from earlier in the year, when many market debutants in Hong Kong -- one of the world’s biggest venues for IPOs -- chalked up massive first-day pops, delivering rich returns for investors. The more muted listing gains could dampen what has been a blistering year, with almost US$33 billion raised so far, and a large portion of it being in sectors such as tech that have been targeted by Beijing.
China has extended its regulatory onslaught from tech and Internet giants to the nation’s booming private education sector, deepening a selloff in stocks. Equities on the mainland and in Hong Kong have slumped this week as investors wonder how far the government is prepared to go to rein in its private businesses, and which sector will next be targeted.
Illustrating the chill taking hold on this year’s debutants, Chinese short video startup Kuaishou Technology is now trading below its offer price, a sharp reversal for what is still the world’s biggest IPO in 2021. The stock soared 161% in its February debut, after raising US$6.2 billion in one of Hong Kong’s most popular deals.
Kuaishou and other Internet giants like Tencent Holdings have slumped this week as expectations mount that tech firms’ ad revenues will be hit by the restrictions on China’s education sector.
The lacklustre performance by Hong Kong listings stands in deep contrast to that being seen in other Asian markets such as India and South Korea -- both of which have had a busy first half for new share sales.
Indian listings have chalked up an average 50.9% post-listing gain this year, while those in Japan and South Korea have seen an average advance of 38% and 35.5%, respectively, the data show. Thai IPOs are also outshining Hong Kong’s, notching an average 10% gain year-to-date.
In another sign of how this year’s listings in Hong Kong have been affected by the rout, all but one of the city’s 10 biggest first-time share sales this year are now under water. Chinese drug developer Joinn Laboratories China Co is the only one not in the red.
US-traded Chinese firms like Baidu Inc and Bilibili Inc, which undertook secondary listings in Hong Kong this year, have also been dragged lower by Beijing’s crackdown.
