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Hong Kong protests

Hong Kong clings to IPO crown despite protest turmoil

Mainland businesses eye listings closer to home as U.S.-China trade frictions continue

Jan Craps, left, CEO of Budweiser Brewing Co. APAC, attends the listing ceremony at the Hong Kong Stock Exchange on Sept. 30.   © Reuters

HONG KONG -- Hong Kong is expected to remain the top market for initial public offerings in 2019, benefiting from a couple of large-scale listings that came despite the ongoing pro-democracy protests in the Chinese territory.

KPMG projects that companies will raise a total of $37.2 billion through Hong Kong IPOs this year, hitting a nine-year high. The city appears likely to lead the global rankings for the fourth time in five years, including in 2018, when $36.9 billion was raised.

Hong Kong's success this year results largely from a secondary listing by Chinese e-commerce giant Alibaba Group Holding and the debut by the Asia-Pacific unit of Anheuser-Busch InBev. Alibaba alone raised $12.9 billion, one-third of this year's Hong Kong IPOs by value.

Budweiser Brewing Co. APAC, the AB InBev unit, raised $5.8 billion, making it the world's fourth-largest stock market listing this year after Saudi Aramco, Alibaba and Uber Technologies.

Delayed IPO plans went ahead after market sentiment recovered starting in September, KPMG said. Such companies include Budweiser Brewing and ESR Cayman, a logistics real estate developer.

The bourse also courted several tech-related IPOs. The Hong Kong Stock Exchange last year began allowing dual-class and shares of money-losing biotech companies. This enabled Alibaba's secondary listing, following the company's 2014 IPO on the New York Stock Exchange. Nine biotech companies in the red also debuted in Hong Kong this year.

More Chinese tech companies that have listed in the U.S. could come to Hong Kong in 2020, said Edward Au at Deloitte.

The trade war is pushing mainland businesses to choose the Hong Kong bourse over an American listing. Thirty-two mainland companies have raised a total of $3.6 billion by listing in the U.S. this year, down from 38 businesses and $9.4 billion in 2018, according to Deloitte.

Meanwhile, IPOs worldwide are seen reaching about $200 billion this year, down from $214 billion in 2018. Startups face greater scrutiny from investors, which led WeWork operator We Co. to postpone its listing.

Nasdaq and NYSE are poised to rank second and third in IPOs this year, but likely will see their figures remain flat from 2018. The Shanghai Stock Exchange is expected to double its tally to $25.3 billion, with the new STAR market for high-tech issues accounting for one-third of the total.

The Tokyo Stock Exchange is projected to fall from the top five due to a lack of big listings this year.

Market watchers are divided on whether the IPO boom will continue in Hong Kong next year. Pro-democracy protests that began here this summer show no sign of abating, as the government continues to reject demands for democratic elections. On Dec. 15, police used pepper spray on protesters who vandalized shops considered to have political leanings toward Beijing.

The city also has added to tensions between Washington and Beijing, with the U.S. Congress passing legislation that supports the Hong Kong protesters. Western investment banks and accounting companies, which play a key role in IPOs, worry about impacts to their operations.

KPMG projects a similar level of IPOs in Hong Kong for 2020, while Deloitte expects a 20% to 30% decrease.

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