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Hong Kong's IPO pipeline fills up as Ximalaya, Xintiandi seek to list, helping city catch up with New York in global fundraising race

Hong Kong's pipeline for initial public offerings (IPOs) is starting to fill up as more companies emerged from the summer lull to file their listing plans, potentially helping the city catch up with New York in the global race for fundraising.

Ximalaya, China's biggest podcasting platform backed by Tencent Holdings, and Xintiandi, the Shanghai commercial property assets of tycoon Vincent Lo Hong sui's Shui On Land, both filed to list in Hong Kong.

They are among nearly a dozen firms who have filed paperwork to go public in the city since the beginning of September. China's largest artificial intelligence company SenseTime Group and 58 Freight, the operator of Hong Kong's GoGoX, filed in August. Top Glove, the world's biggest rubber glove maker, is expected to renew its plan to list in Hong Kong.

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Heightened regulatory scrutiny in China and the United States have caused a number of companies to take a "wait and see" approach to listings this year, but that could play in Hong Kong's favour, said Edward Au, the co-leader of Deloitte's national public offering group.

The tighter listing requirements and regulatory measures "coming together may possibly result in a busy last quarter of the year for capital raising," even if the pace of secondary listings fail to live up to expectations in the second half due to regulatory crackdowns and declining valuations, Au said.

China's government unveiled a list of regulatory measures in July following the US$4.4 billion IPO in New York by Didi-Chuxing, a move that ignored injunctions by Chinese bureaucrats in what some described as a "deliberate act of deceit."

Ximalaya FM, China's largest podcasting platform, has introduced a smart speaker which is specially made for Communist Party members to enhance their knowledge of party doctrine. Photo: Handout alt=Ximalaya FM, China's largest podcasting platform, has introduced a smart speaker which is specially made for Communist Party members to enhance their knowledge of party doctrine. Photo: Handout

The company, which dominates China's ride-hailing market, reportedly pushed forward with the biggest IPO by a Chinese company in the US since 2014 before Beijing regulators completed a data security assessment, prompting a deeper review by China's top cybersecurity regulator. As part of their clampdown, Chinese regulators introduced new rules to review all overseas listings by firms who hold the personal data of 1 million or more Chinese people.

Added together, the moves are pausing the plans of dozens of Chinese firms who have filed to go public in the United States this year, causing some of them to consider listing in Hong Kong to access global capital.

The city's bourse also is on pace to triple the pace of debuts by pre-revenue biotechnology companies this year, with 29 new listing applications in the pipeline.

I believe that China-based companies that want to raise capital from American investors should disclose more of the information we need to make informed investment decisions. pic.twitter.com/EoGihzKTDN

- Gary Gensler (@GaryGensler) August 16, 2021

Chinese lifestyle platform Xiaohongshu, e-commerce platform Meicai, medical data solutions provider LinkDoc Technology and the fitness app Keep are among the firms that have delayed or scrapped listing plans in the US in recent months.

Ximalaya and Hong Kong logistics start-up Lalamove are among several firms who have already shifted or are considering moving their listings to Hong Kong as a result.

Mainland China's bourses have primarily benefited from the regulatory upheaval, with the Shanghai and Shenzen stock exchanges receiving a dozen new listings this month between them. However, the pace remains much slower than a year earlier, when the bourses, along with Shanghai's Star Market, hosted a combined 54 debuts.

The instruction last month by the Chinese President Xi Jinping to establish a new bourse in Beijing will offer a listing venue for innovative small and medium enterprises, potentially competing with Hong Kong's growth enterprises market (GEM).

Hong Kong's IPOs totalled US$35.6 billion so far this year, third globally behind Nasdaq's US$60.9 billion and the US$43.7 billion on the New York Stock Exchange (NYSE), according to Refinitiv's data.

The Hong Kong stock exchange had only one listing since the beginning of September, a pale shadow of the 14 that listed in September 2020, according to financial data provider Refinitiv.

August, traditionally a quiet month in the northern hemisphere summer, had three listings, the data showed.

Despite the slow start to September, the IPO pipeline is beginning to fill up for later this month and in the fourth quarter.

Several beverage chains that produce Chinese tea and bubble tea are considering plans to list in Hong Kong later this year, or in 2022, according to media reports. Mixue Bingcheng, ChaBaiDao, Gu Ming and Lelecha are among companies eying potential listings, even after the US$654 million IPO by Nayuki Holdings made a tepid trading debut in June.

Shenzhen-based tea chain Heytea, which includes Sequoia Capital China and Hillhouse Group as investors, hired UBS for a potential US$500 million listing in Hong Kong, Bloomberg reported on Monday. UBS declined to comment on Tuesday, while Heytea did not respond to a request for comment.

Additional reporting by Georgina Lee

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.