HONG KONG -- A Chinese bank is breathing life back into Hong Kong's initial public offering market after Beijing's clampdown on the technology sector crippled volumes for much of the third quarter.
Dongguan Rural Commercial Bank, which finances farmers, agricultural groups and small companies, hopes to raise 10 billion Hong Kong dollars ($1.29 billion) in an offering that opened for subscriptions on Thursday.
A successful IPO by the bank, the fifth-largest of China's rural lenders, would mark the first $1 billion offering in the city since electric vehicle maker Li Auto's $1.5 billion fundraising in early August.
The bank looks to price its offering Wednesday, with the shares to make their debut Sept. 29.
"Investor feedback was strong, and we expect a strong debut for Dongguan will throw open the floodgates," a person involved in the transaction said. "The IPO pipeline is very strong, and we are confident we will have a busy close to the year."
Many of the 179 listing applications that were pending with the Hong Kong Stock Exchange as of June 30 could be revived. Bonnie Chan, head of listings at the exchange, said earlier this month that the queue had now reached 220, with many candidates "optimistic" about getting deals done.
After a lull in new filings amid unsettled markets, 33 companies have submitted IPO applications since Aug. 20, according to the exchange. They include Chinese artificial intelligence startup SenseTime, cargo courier company 58 Freight, redevelopment company Shui On Xintiandi and Ximalaya, China's biggest podcasting platform, which is backed by Tencent Holdings.
Investor confidence has been shaken this year as Chinese authorities have unleashed a barrage of regulation to limit the influence of internet platforms, imposed record fines and rolled out rules that making offshore listings harder, a move that short-circuited Ximalaya's original New York IPO plan.
The ripple effect reached Hong Kong's IPO market, when Cloud Village, game developer NetEase's music streaming unit, shelved a potential $1 billion debut offering last month and bigger rival Tencent Music Entertainment deferred plans for a secondary listing.
New listings in Hong Kong have raised $5 billion since July, compared with $11.8 billion in the second quarter, data compiled by Dealogic shows. The tepid third quarter slowed what looked to be a record year for new listings. So far this year, companies have raised $35.5 billion in the city compared with $51.6 billion in all of 2020, according to Dealogic.
The next few weeks will be crucial. Hong Kong recorded a strong fourth quarter in each of the past two years. The October-December period produced 60% of total volume for 2020 and nearly three-fourths of the 2019 total, according to Dealogic.
"The regulatory changes caused unprecedented volatility and paused deal discussions," an equity capital markets banker said. "However, as always, investors and issuers waited for the volatility to subside, and the optimism remains intact."
Most of the current applicants are "aspiring to get listed this year," Chan said. The fourth quarter "could be crowded, market conditions allowing."
Since the "pause," the so-called homecoming trend in which U.S.-traded mainland companies pursue a listing in Hong Kong also has accelerated, deal arrangers said.
Such listings hedge against a forced exit from the New York Stock Exchange or Nasdaq Stock Market. Under a law enacted last year, Chinese companies risk being kicked off American exchanges starting in 2023 if U.S. regulators are not permitted to review their audit records. Beijing forbids such reviews on national security grounds.
Since late 2019, 14 companies including Alibaba Group Holding, online retailer JD.com, NetEase and EV makers Xpeng and Li Auto have raised more than $40 billion in total in Hong Kong.
Aside from Tencent Music, companies making "homecoming" plans include Twitter-like service Weibo and online discount retailer Vipshop Holdings, the deal arrangers said. But such deals may spill into next year as the valuations of these companies have been battered, the arrangers said.
