Why IPOs are surging in Hong Kong
In the busiest year for IPOs in a decade, property management services listings drove activity
Hong Kong recorded its busiest year for initial public offerings in a decade in 2020, with newly-listed companies raising approximately US$50 billion (HKD 387 billion).
New-economy companies, which are typically technology focused, and biotech firms accounted for close to 60 percent of IPOs. This is partially the result of 2018 rules allowing pre-revenue biotech and new-economy companies with weighted voting right share structures to raise capital.
Property management services also drove activity. Several mainland Chinese real estate developers spun off their property management services units, including China Resources Mixc, the property management arm of China Resources Land; Evergrande Property Services under China Evergrande Group; and KWG Property’s KWG Living.
A total of 17 property management companies listed in Hong Kong last year. They are likely to use the proceeds to make strategic investments and acquisitions to expand their commercial operational businesses, pursue investments in providers of value-added services, and invest in information technology systems.
This January, China’s Ministry of Housing and Urban‑Rural Development, among nine other state ministries, pledged to incentivise property management services companies to extend their services into elderly and child care, property brokerage, as well as courier and housekeeping services.
“The COVID-19 outbreak has helped property management services companies to further realise the importance of such value-added services. This new directive will encourage more property management firms to provide a broader range of services and we expect more companies to come list in Hong Kong,” says Wendy Chan, growth director for the Greater Bay Area at JLL, specialising in valuation and advisory services.
Top IPO destination
Along with the Nasdaq and Shanghai, Hong Kong is expected to remain among the top three IPO markets globally in 2021, according to JLL, which over the past year accounted for approximately 40 percent of valuations related to Hong Kong IPOs and has been in the market leading position for more than a decade.
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“Hong Kong is still a natural choice for Chinese companies because of its robust financial system and the advantages of cross-border investment channels made available through the Hong Kong-China Stock Connect scheme,” says Wendy Chan.
The new economy, renewable energy and “new infrastructure” sectors will likely dominate Hong Kong IPO activity in 2021, say experts in JLL’s valuation and advisory services team for Greater China.
“There is a lot of cash in a low interest rate environment, bringing a new era for corporates to transform themselves. 2021 will be a ‘year 0’ for many corporates to transform themselves into technology-based enterprises, with help from the capital markets,” says Simon Chan, executive director who heads up the business valuation team for JLL's valuation and advisory services in Greater China.
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