HONG KONG -- New stock listings in Hong Kong have had their best start to a year ever and the pace is set to accelerate with $28 billion of anticipated share sales already lined up.
The city is attracting growing volumes of initial public offerings from mainland Chinese companies as well as so-called homecoming listings by U.S.-traded companies, which are seeking to hedge the threat of being banished from U.S. exchanges amid tensions between Beijing and Washington.
Among the companies expected to sell shares in Hong Kong are U.S.-listed companies such as online search group Baidu, Tencent Music Entertainment Group, the Twitter-like service Weibo, short-video app Bilibili, online car sales website Autohome and e-commerce company Vipshop Holdings.
Those companies collectively could raise as much as $16 billion, people familiar with the plans said.
Meanwhile, JD Logistics (a unit of online retailer JD.com), ByteDance's Douyuin and ANE Logistics are among those working on initial public offerings in the city, which together could raise more than $10 billion.
The world's largest rubber glove manufacturer, Top Glove, which is listed in Kuala Lumpur and also traded in Singapore, said last week that it also plans to raise as much as $1.9 billion in a further listing in Hong Kong.
So far this year 19 companies have raised $9.5 billion in Hong Kong, compared with just $1.2 billion during the same period last year, according to data compiled by Dealogic. Last year, a total of 137 companies raised $51.6 billion in the city, including $17 billion by mainland companies traded on American exchanges.
"This year we have a very busy schedule to bring interesting IPOs to the market," Calvin Tai, the interim chief executive of Hong Kong Exchanges & Clearing, said in a media call last week after the bourse reported record 2020 earnings. "We have reasons to believe we have a very strong pipeline."
Hong Kong-based Udhay Furtado, co-head of equity capital markets for Citigroup in Asia, said: "We continue to see a strong pipeline and expect to see a busy issuance quarter, whilst the current liquidity environment holds."
The deals pipeline in Hong Kong is part of a record wave of new listing volumes globally, amid flush liquidity driven by stimulus amid the coronavirus pandemic. In the U.S., the surge in IPOs also is being driven by a vogue for listing special purpose acquisition companies -- shell companies that raise money with the goal of acquiring a business.
"The highlight of the market is going to be China growth listings," said Tucker Highfield, co-head of Asia Pacific Equity Capital Markets at Bank of America. "Capital markets are becoming the primary source of return for fund managers, especially with tech listings doing really well. The issuance calendar is set to be very active."
Hong Kong listings have had strong debuts over the past two years, delivering big returns for investors.
Short-video app Kuaishou Technology soared a record 161% on its first day of trading last month. The shares closed Tuesday at HK$319 compared with the issue price of HK$115.
Equity indexes from China to the U.S. scaled records earlier this year as the vaccine rollout globally and additional U.S. stimulus embolden investors to bet on a stronger-than-expected economic recovery from the pandemic.
"The markets are currently robust, driven by the strong liquidity and post-COVID recovery, and issuers are more likely to tap the markets when they're supportive, " said Johnson Chui, head of Asia-Pacific Equity Capital Markets at Credit Suisse.
"Equity capital market issuance activity so far this year is higher compared to previous pre-COVID years, and even compared to the years when the market was particularly strong," he said.
Hong Kong is expected to benefit after the U.S. Congress last year enacted a law to boot Chinese companies off U.S. exchanges unless American regulators are permitted to review their financial audits. Beijing forbids such reviews, citing national secrets.
Last year, 30 Chinese companies raised $12 billion in the U.S., the highest amount in six years, though bankers said the pace of such deals had slowed. Currently, Tuhu, a car maintenance startup, and esports company VSPN are considering U.S. listings, according to media reports.
While the mood is optimistic, global debt and equity markets turned volatile last week amid concerns that economic recovery could spur inflation and force central banks to withdraw monetary policy support. Government bond yields surged last week, pulling down equity markets.
Higher bond yields can hurt growth stocks such as technology companies, which are bought for the future cash flows they promise amid record low yields. If interest rates were to rise, the attractiveness of such assets would diminish.
"The risks to the deal flow are the rates going up, which impacts valuation multiples," Bank of America's Highfield said.