Hong Kong IPO outlook 2023: back from the brink

An improved macro environment is set to provide a leg up for Hong Kong’s beleaguered IPO market to help it remain one of the top three fundraising destinations in 2023.
Hong Kong IPO outlook 2023: back from the brink

After a miserable 2022 with total fundraising dropping almost 70%, the market consensus is that Hong Kong’s initial public offering (IPO) market will get better in the New Year largely driven by a more friendly macro environment at home and abroad.

How strong of a rebound will depend on how much policy certainty China can provide to international investors, and how volatile the global market will be amid a potential recession.

In what has emerged as an unprecedented market downturn, the global IPO market recorded a 60% drop in fundraising, led by the US, which saw fundraising slumping 90%, with the top two IPO markets - Nasdaq and New York stock exchanges - slipping out of the global top five spots.

Hong Kong also has been no exception.

As of November 30, funds raised in the city totalled HK$87.9 billion ($11.3 billion), PwC data shows. Over 80% of proceeds were recorded in the second half. The data forecasts HK$105.6 billion to be raised for the full year – a 68% drop from 2021 - with 80 new IPOs.

As rate hikes are digested and China gradually opens up, PwC expects 100 IPOs in Hong Kong in 2023, raising between HK$180 billion and HK$200 billion. 

KPMG shares a similar outlook. It expects the city to return to sit among the top three global IPO hubs by the end of 2022 and remain in that place in 2023 with 90 IPOs and HK$180 billion raised.

Source: KPMG


Hong Kong’s stock market has been among the worst performers in 2022, with the benchmark Hang Seng Index plummeting 17% as of Thursday, and the Tech Index slumping 26.8%, damaging investor risk appetite and thus hurting valuations and IPO performance.

Hong Kong’s fundraising volume is mostly contributed by the listing of large technology companies, something of a muted market in 2022.

Louis Lau, KPMG

KPMG China’s partner in the capital markets advisory group Louis Lau thinks rate hikes have been priced in by the market, and the city will start to see the gradual return of large IPOs in the second half of 2023.  

Meanwhile, except for the new special purpose acquisition company (SPAC) listing regime that was rolled out this year, the Hong Kong Exchanges and Clearing (HKEX) in October also announced a new channel for both commercial and pre-profit specialist technology companies to list in Hong Kong, a move that is expected to draw high-growth early-stage innovative companies, and Chinese companies whose American Depositary Receipts (ADRs) face delisting in the US.

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Around 10 to 15 specialist technology companies will list in Hong Kong under the new rule in 2023, raising about HK$50 billion to HK$60 billion, PwC estimates.

Irene Chu, KPMG

The regulator is expected to finish reviewing the proposed rules in the first quarter of 2023, and the first specialist technology company IPO could happen as early as the second half of that year, KPMG’s Lau said.

Companies in the new energy sector will likely be among the first to list in Hong Kong under the new rules, driven by China’s carbon neutrality push, said Irene Chu, KPMG China’s partner and head of new economy and life sciences in Hong Kong.

“Hong Kong’s IPO market used to be dominated by the TMT (technology, media, and telecom) sector. The future is likely to be more about innovative companies in the industrial and hardware sector that can provide climate solutions,” Chu said.


Asset owners that used to be very active in Asia’s IPO market, including Hong Kong, have been “completely risk-off” in 2022 and have stayed away from IPOs because of their poor performance, noted Christopher Wong, head of equity capital markets Asia Pacific at BNP Paribas.

He thinks it’s likely that the IPO market will stabilise and offer some upside next year, led by energy transition, healthcare, and consumer themes.

Although the distressed valuations could gradually get back to normal, investors were still very cautious about buying into IPOs with lofty valuations, Wong noted. 

“What is clear is that to get to the market, issuers will need to have strong cashflow generation ability to support intrinsic valuation. It will be a challenge, in current market environmentto market anything which is either pre-revenue or pre-profit,” he told AsianInvestor.

Christopher Wong, 
BNP Paribas

In November, Hong Kong stocks rallied 26.6% from lower than 15,000 points to above 19,000 points when China dropped its zero-Covid policy.

“So far, for this part of the world, things are not so much focused on recession fears yet. People are still managing the Covid policy. Then the next step is to think about the GDP growth, the recession, inflation, and all that.

“Once the reopening happens, whether the market can go higher beyond 19,000 and back to 20,000, will depend very much on fundamentals,” he said.

A favourable economic environment with supportive policies will be much needed for markets to move higher, he added. 

“Ultimately, investing in the Hong Kong and China market is increasingly being dictated by policy directives. The less policy clarity there is, the more investors will stay away.

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“But as soon as there's more visibility, foreign flows will come back very quickly. When you look at the valuation, Hong Kong is fundamentally still very attractive,” he said.


Asset owners across Greater China usually play a role when there are good deals in the IPO market for private equity exits, IPO subscriptions, and shares trading.

But for overseas asset owners, those from Southeast Asia, especially sovereign wealth funds, there could be a more cautious wait-and-see attitude for China, Wong believes.

Alternatively, sovereign wealth funds from the Middle East have become more active due to a growing political connectivity between China and the Middle East, he added.

“It means that China issuers are better positioned to get some interest from Middle Eastern money. And there's so much cash sloshing around the Middle East,” Wong said.

In a recent speech, HKEX chairwoman Laura Cha said the bourse is trying to attract more companies and investors from the Middle East and Southeast Asia to participate in the city’s IPOs.

Their interest in IPOs, as long-term investors, is still likely to be in innovative technology and green sectors that represent the future of the world, including artificial intelligence (AI), automation, and healthcare, Wong said.

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