By Julia Fioretti
HONGKONG (Reuters) – Hong Kong is on course to take the global IPO crown this year for the most money raised in stock market flotations, narrowly ahead of arch-rival New York, but its new listings have posted the worst performance among leading bourses, data show.
The figures are a blow to Hong Kong, whose hopes of a listings bonanza spurred by new tech-friendly rules have been dented by weak markets, sparking fears the soggy performance could weigh on initial public offering (IPO) volumes in 2019.
Several companies have in recent weeks cut the size of their offerings, while others have held back from floating in the hope of a better environment later.
Companies listing in Hong Kong have sold shares worth $31.4 billion (£24.7 billion) so far this year, the highest total in eight years, compared with $30.2 billion on the New York Stock Exchange (NYSE), according to Dealogic data.
But just six of the biggest 20 IPOs in Hong Kong that have begun trading were above their offer prices a month after debut, the data show, compared with 16 on the NYSE and 10 on Nasdaq.
Two of Hong Kong’s biggest deals, Xiaomi <1810.HK> and Meituan Dianping <3690.HK>, which raised $9.7 billion between them, are down 19 percent and 26 percent respectively since their floats in July and September.
Hong Kong has been hit by volatility stemming from concerns over a U.S.-China trade war and by slowing growth in China, the world’s second-largest economy.
The city’s benchmark Hang Seng Index <.HSI> has fallen 13 percent this year, while the Shanghai Composite index <.SSE> has dropped more than 20 percent. In the United States the S&P 500 is up 0.8 percent.
“From an investing perspective it’s obviously been terrible,” said a Hong Kong-based investor at a major asset manager.
“A lot of these companies are very interesting, they’re really attractive … and I think there’s been a certain amount of … fear of missing out,” the person said, referring to investors’ continued participation in IPOs despite their performance.
Hong Kong has hosted a series of Chinese tech floats after a change in its listing rules in April to allow dual-class shares, brought in to avoid a repeat of Chinese e-commerce group Alibaba <BABA.N> picking New York in 2014 for its record $25 billion IPO because Hong Kong would not accept its unusual control structure.
Bankers said a factor in the soggy post-IPO performance was a reluctance by many company founders to accept lower valuations, meaning many deals priced high. Xiaomi for instance, valued at $54 billion in its July IPO, had been seeking a valuation of more than $70 billion as recently as May.
Bankers however took comfort from the renewed interest this year in Hong Kong listings among global institutions, many of which had previously been deterred by a parade of unexciting Chinese state-owned enterprises that dominated local IPOs.
“That (poor performance) is symptomatic of the process of re-institutionalisation of the Hong Kong market and that is going to take time,” said a senior equity capital markets banker. “It was never likely to be particularly smooth.”
(Reporting by Julia Fioretti; Editing by David Holmes)