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HKEX eyes another banner year

(ATF) Hong Kong’s stock market is looking at another banner year propelled by a change of guard at the top, a rash of new economy issuance and US listed Chinese companies seeking secondary listings.

Last month, Hong Kong Exchanges & Clearing announced that 52-year-old Argentine Nicolas Aguzin will succeed Charles Li as CEO of the world’s 5th largest stock exchange signaling a greater focus on wealth management, according to some market analysts.

“I think specifically, picking someone from the private bank from the wealth side is meant to send a very, very clear signal that Hong Kong exchange is here to be the wealth management hub of Asia,” said Tariq Dennison, a wealth adviser at GFM Asset Management told Asia Times Financial Television.

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“I mean, really, certainly for Greater China, but really as the gateway for any wealth management products coming out of mainland China to the rest of the world and from the rest of the world into China.”

Aguzin’s appointment, effective from May this year, makes him the first non-Chinese to lead the HK$54 trillion institution and he joined HKEX from JP Morgan, where he is currently Chief Executive Officer of JP Morgan’s International Private Bank.

There were other drivers to stepped up listing activity as the companies brace for more stringent oversight over foreign issuers in the US which could prompt more China concept stocks to pursue secondary listings in Hong Kong, or consider Hong Kong or the Mainland, as their priority listing destination, said Deloitte in a note.

These factors could provide tailwind to the issuance activity in the market with PwC predicting total fundraising of between HK$420 and 460 billion in 2021. This comes on the back of a strong year in 2020 when total funds raised by IPOs aggregated HK$397.7 billion, marking an increase of 25% from the previous year.

New economy and US listed Chinese enterprises are the main drivers for listing activities, with the active listings of biotech companies in 2021 expected to make Hong Kong the listing platform of choice for biotech companies in Asia.

‘Record high’

“Supported by a healthy pipeline, 2021 will be a great year for the Hong Kong IPO market, we are confident that the total IPO funds raised will hit a record high,” said Benson Wong, PwC Hong Kong Entrepreneur Group Leader. 

“We expect Hong Kong to regain the top global IPO fundraising markets position for total funds raised in 2021.”

Hong Kong’s listing volumes has seen a robust increase annually since 2017 with the total deal value jumping to $51.6 billion from $16.5 billion, according to Dealogic. The market has had the best start to the year in 2021 with total volume of $9.95 billion.

The increase in fundraising activity last year was mainly on account of homecoming listings with nine US-listed, Chinese-based companies completing secondary listings and raising a total of HK$131.3 billion, accounting for over a third of funds raised. 

“These secondary listings signify Hong Kong’s solid fundamentals and its importance as an international capital-raising venue with a growing ecosystem for innovation and new economy companies,” said KPMG analysts in a note.

“The trend of homecoming and biotech listings further stimulates the change in the composition of Hong Kong’s market, moving from the traditional base of real estate and financial services to a base of new economy listings, such as technology, biotech and e-commerce. The growing ecosystem for new economy companies would attract more companies of the same kind to follow suit and make Hong Kong an even more attractive international capital-raising venue in the new era.”

Umesh Desai

Umesh Desai is the Executive Editor at Asia Financial. Prior to this he spent over two decades with Reuters News as Asia Pacific Chief Correspondent in Hong Kong and Bureau Chief in Bombay. Before becoming a journalist Umesh was a credit ratings analyst with Moody's arm in India - ICRA. A chartered accountant by training, Umesh began his career as an equity analyst. His Twitter handle is @umesh_desai

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