Although overall new listings are down 24% during the first six months of 2020 in comparison to the same period in 2019, this is not out of sync with global markets. Despite this, the total funds raised in the first half of 2020 outperformed last year by 22% with a total value of HKD88 billion raised through IPOs.
This may be attributable to the new listings and the secondary listings of two giant PRC-based tech companies, namely, JD.com and NetEase, in June, with HKD51 billion funds raised combined. This follows on from Alibaba’s HKD101 billion listing in 2019, demonstrating the continued preference for PRC based tech companies to list in Hong Kong despite COVID-19.
Interestingly, both companies are already listed on the Nasdaq indicating the trend of US-listed PRC-based companies seeking secondary or new listing in Hong Kong is set to continue into the second half of 2020. In particular with PRC-based companies listed in the US facing closer scrutiny as Sino-U.S. tensions heighten, these uncertainties are set to push these companies to seek secondary listings in a more stable environment.
As one of the preferred capital raising venues for PRC issuers it is not surprising that around 63% of the newly listed or relisted companies are headquartered in the PRC. In 2020 there has been a notable increase in Malaysian and Singaporean headquartered listings which contributed to around 8% of new listings up to July 2020, demonstrating a wider Asia market appeal to list/ relist on the HKEX.
The offshore market continues to play a vital role in the listings market and the Cayman Islands remains the most popular place of incorporation for the holding company. Between January to July 2020 around 95% of total listings used a Cayman Islands company as the holding company. PRC accounted for around 4% and Bermuda for around 1%. The Cayman Islands remains popular due to its trustworthy and reliable legal system. Cayman Islands laws, derived from English common law and supplemented by local legislation, ensure Cayman Islands entities are internationally recognised and accepted. Furthermore, Cayman Islands currently levy no capital gains, income, profits, corporate or withholding taxes (whether on the offshore vehicle or on the holders of securities issued by such vehicle).
Our Hong Kong IPO team continues to see plenty of enquiries and instructions from the Asia region with a wide spectrum of industries aiming to get listed in Hong Kong, which include Hong Kong and Mainland Chinese companies as well as international companies with an Asian nexus. We are happy to see Hong Kong remains a compelling listing and fundraising venue in Asia for companies seeking to go public and raise funds.
With experts who specialise in Bermuda, Cayman Islands and British Virgin Islands law, our IPO team is positioned to advise an expanding client base across the Asia Pacific region on their IPO and listings business.