Hong Kong's IPO market withers as billion-dollar listings lapse

2021 will still likely rank highly in terms of IPO proceeds due to the sheer volume of issuance in Hong Kong in the six months. PHOTO: REUTERS

HONG KONG (BLOOMBERG) - Hong Kong's primary-listing market is going through a dry patch in what is normally the busiest time of the year.

Several potential billion-dollar initial public offerings (IPOs) ranging from supermarket owner WM Tech Corp to healthcare start-up We Doctor Holdings have let their applications lapse in recent weeks, as regulatory scrutiny and stock market weakness crimp listings.

Large IPOs falling by the wayside are a further sign of how China's regulatory onslaught is causing a downturn in the financial hub's market for first-time share sales.

Chinese President Xi Jinping's push to align companies with his vision of "common prosperity" has caused a roadblock and Hong Kong equity benchmarks are the world's worst this year.

"Where the wind blows largely depends on the industry of the IPO-aspirant," said Mr Justin Tang, head of Asian research at United First Partners in Singapore. "Companies in the consumer tech and real estate related sectors will continue to experience headwinds in the form of the 'common prosperity' campaign and regulatory reforms."

After a stellar first half, the value of IPOs dipped to just US$6.2 billion (S$8.4 billion) in the third quarter - the lowest since the start of the Covid-19 pandemic and behind South Korea for the first time in four years.

To be sure, this year will still likely rank highly in terms of IPO proceeds thanks to the sheer volume of issuance in Hong Kong in the six months.

With US$37.7 billion raised so far, this year is on track to be one of the best of the last decade.

We Doctor's planned float - which could have raised as much as US$3 billion - got caught up in China's tightening oversight of how its tech giants manage the data they collect.

The Tencent-backed company plans to refile for a Hong Kong listing but any deal will not be quick given the time needed to update financial numbers, as well as regulatory uncertainty, according to people with knowledge of the matter.

Meanwhile WM Tech, which is behind the Wumart chain and German multinational company Metro's outlets in China, faced questions from the bourse about its business operations, Bloomberg News reported.

The company, which had been seeking to raise as much as US$1 billion, is no longer actively pursuing an IPO, people with knowledge of the matter have said.

Online property search engine Anjuke, backed by online classified marketplace 58.com, had also been targeting a US$1 billion IPO, Refinitiv publication IFR reported. However, the combination of falling investor enthusiasm for tech stocks and the current travails of China's debt-ridden property sector mean the timing was not opportune.

Anjuke may reattempt a listing next year if the market sentiment improves, people with knowledge of the matter said. Public relations departments at We Doctor and Anjuke did not reply to e-mails seeking comment.

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