After 25 years, has Hong Kong’s capital markets lost its sparkle?

Funds raised by IPOs in H122 are predicted to reach HK$17.1b

It has been 25 years since the Hong Kong Stock Exchange’s handover and since then it has proven its efficiency as a platform for corporate listing and financing – with a total of 2,578 companies listed and topping global IPO fundraising for seven of the last 13 years.

However, the ongoing pandemic, the risk of geopolitical instability, and other unfavourable factors such as rising interest rates to suppress global inflation have slowed down the city’s IPO fundraising activities in 2022.

Based on a PwC Hong Kong report, there were only 22 new listings in Hong Kong in the first half of the year, mostly comprising retail, consumer goods & services (41%), and financial services (23%).

Amid the ongoing pandemic, the risk of geopolitical instability and other unfavourable factors – including rising interest rates to suppress global inflation – Hong Kong’s IPO fundraising activities slowed in the first half of 2022.

PwC Hong Kong estimates in the report that there were 22 new listings in Hong Kong in the first half of 2022. These mostly comprised retail, consumer goods & services (41%), and financial services (23%).

The number of its Main Board IPOs also decreased by 53% YoY. Meanwhile, total funds raised by IPOs in the first half of 2022 are predicted to reach$17.1b, marking a decrease of 92% compared to the same

Eddie Wong

Benson Wong

Organisations are choosing a ‘wait-and-see’ approach to economic revival

period last year.

Eddie Wong, PwC Hong Kong Capital Markets Services Partner said the slowing down of Hong Kong’s capital markets was because organisations are choosing a ‘wait-andsee’ approach to economic revival and postponing their fundraising activities due to market uncertainties.

“Organisations need to be wellprepared, review their business needs carefully and go public at the right time,” Wong added.

The IPO market’s slowdown, however, will not be for too long said PwC Hong Kong, adding that the market will gradually regain momentum in H2 2022 “with the support of a number of policies that are favourable to economic growth.”

“Hong Kong’s pipeline for IPOs remains active, with the proven fundamentals of the U.S.-listed Chinese enterprises and new economy businesses expected to continue to be the main drivers of listing activity,” Wong said.

This was echoed by Benson Wong, PwC Hong Kong Entrepreneur Group Leader, saying that economic growth and liquidity measures from the Government and the Central Bank will allow “Greater China companies without weighted voting rights and which are not from innovative sectors to seek secondary listings in Hong Kong.”

For the entire year, PwC Hong Kong expects total funds raised to be between $180b to $200b in 2022.

Net-zero targets uncover HK’s need to increase retrofitting rate: JLL

Hong Kong will need to speed up retrofitting 85% of its buildings to reach its net-zero targets, property consultant JLL reported.

The real estate sector in Hong Kong accounts for 60% of the overall carbon emissions in the city. This is the same level as the average emissions seen across 32 urban centres across the globe, but higher than the 40% estimate of the World Green Building Council.

“Buildings are both the problem and the solution for our climate crisis, and partnerships between the private and public sector are critical to driving tangible progress in decarbonising the economy. For Asia Pacific, this is especially important in cities like Hong Kong, where 85% of buildings are over 10 years old and extensive retrofitting is required of existing building stock. Yet no targets have been set to decarbonise buildings,” Kamya Miglani, Head of ESG Research, Asia Pacific, JLL, said.

“If this doesn’t happen, we can expect local governments to introduce heavy regulation and penalties on building standards – there will be winners and losers as cities race to net zero carbon.”

In its “Decarbonising Cities and Real Estate” report, JLL found a significant gap between policies in cities, the impact of the industry, and the climate science. This calls for a fast response to limit the impact of climate change.

“Even with a current rate of between 300 and 500 new buildings under construction in Hong Kong each year, between 60% and 80% of the buildings that will be in existence in 2050 are already standing,” Helen Amos, Head of Sustainability at JLL in Hong Kong, said.

“The buildings are not efficient enough to comply with future carbon reduction targets. Retrofitting the existing building stock to net-zero carbon is central to decarbonising a city’s economy. Given that Hong Kong is slow to implement strict standards on new builds, the city should accelerate the pace of retrofitting rate to over 3.5% per year.”