A review of the 2020 IPO Capital Market
Despite the unprecedented challenges arising from the Covid-19 pandemic and its economic backdrop, 2020 was a very busy year for the capital market in Hong Kong. The Hong Kong Stock Exchange (Stock Exchange) is on track to record its best year in terms of IPO fundraising volume since 2010.
As of 10 December 2020, the total IPO fundraising volume for the year already represented an increase compared to 2019, with a 25 per cent rise recorded year-over-year. The listings under the pre-revenue biotech chapter had also experienced substantial growth with 26 new listings in 2020, raising a total of HKD70.7 billion since the launch in 2018 of the new listing regime which allows companies in emerging and innovative sectors and pre-revenue biotech companies seeking to list to make formal application.
We observed a shift in the focus of the market where the new economy companies had taken centre stage. As of 10 December 2020, they accounted for close to 60 per cent of IPO funds raised in Hong Kong since the new listing rules took effect. The average daily turnover contribution from the new economy companies listed since 2018 in the cash equities market had also increased from 4.1 per cent in 2018 to 22.8 per cent in November 2020. Hong Kong has now become the world’s second largest biotech fundraising hub, ushering in 47 healthcare and biotech listings to the Stock Exchange Main Board since the launch of the new listing regime.
In October 2020, the Stock Exchange published its consultation conclusions on corporate weighted voting rights (WVR) companies. The Stock Exchange decided not to implement the proposals set out in the consultation paper, giving the market more time to develop a better understanding of the proposed regulatory approach towards regulating listed companies with WVR structures and their controllers. However, the Stock Exchange did decide to extend the grandfathering arrangements to enable qualifying issuers with corporate WVR to seek secondary listings in Hong Kong.
While it appears that the Hong Kong stock market will not be seeing new listings with corporate WVR structures in the near future, the extension of the grandfathering arrangement is said to be paving the way for more Greater China companies to seek secondary listings in Hong Kong, especially technology companies currently facing closer scrutiny as Sino-US tension heightens.
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