Hong Kong’s IPO Scene Goes Dry in 2022 as Profits Take a Plunge

According to Hong Kong Exchanges and Clearing (HKEX), the city’s stock exchange experienced the lowest number of new listings in more than ten years last year, reflecting the challenge of reviving the economy as it emerges from pandemic-induced isolation. During 2022, there were 90 initial public offerings (IPOs) worth HK$104.6 billion ($13.3 billion), a decline of almost 70% from the previous year.

Between 2013 and 2020, Hong Kong’s bourse was frequently regarded as the world’s top IPO venue, with over 100 new listings annually. The latest numbers represent a significant decline from the high levels seen in 2020 when IPOs raised HK$400 billion.

The exchange also experienced a 20% decrease in annual profits to HK$10.1 billion, marking the first decline since 2016. At the beginning of last year, a significant part of Hong Kong’s economy was shut down as the highly transmissible Omicron variant resulted in the city’s worst-ever coronavirus outbreak.

Moreover, mainland China’s regulatory crackdown, which disrupted initial public offerings from Chinese mega-companies, further complicated the economic climate. Although Hong Kong markets rallied last month, buoyed by optimism about China’s reopening and hope for a reduction in US interest rate hikes, they have since fallen from their peak in late January. Nonetheless, HKEX saw a flurry of activity in the last month of the year, with almost a quarter of the IPOs taking place.

Profits in the fourth quarter increased by 11% year-on-year to HK$2.98 billion, while quarterly revenue rose by seven percent. According to the exchange operator, the second half of the year demonstrated “encouraging momentum” in the IPO market, and Hong Kong remained one of the world’s top four markets in 2022, despite the challenging global economic and geopolitical conditions. “Despite the challenging global economic and geopolitical backdrop, HKEX remained one of the world’s premier capital-raising venues,” said CEO Nicolas Aguzin.

The Chinese financial center has resumed its quest for international listings, with city leader John Lee personally reaching out to Saudi Aramco. Since the start of the year, HKEX’s share price has decreased by roughly three percent, while the city’s benchmark Hang Seng Index has risen by roughly three percent. On Wednesday, Hong Kong finance chief Paul Chan stated that the stock exchange would study proposals to stay open during inclement weather.

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