[HONG KONG] Hong Kong replaced New York this year as the world's biggest IPO market by the amount of funds raised, buoyed by Chinese banks and other financial firms, with the deal pipeline pointing to a stronger year ahead.
Companies raised US$25 billion via initial public offerings (IPOs) in Hong Kong so far this year, higher than the US$19.4 billion raised in New York, preliminary data from Thomson Reuters data shows.
Many Chinese brokers and banks had rushed to raise funds to finance their margin loan business and boost core capital amid a stock market rally earlier this year. Big Hong Kong IPOs in 2015 included the US$4.8 billion deal by Guotai Junan Securities Co Ltd and a US$2.5 billion capital raising by China Huarong Asset Management Co Ltd.
For New York, which was the world's biggest IPO market for the past three years, IPO proceeds slumped 73 per cent this year after surging to US$71.7 billion in 2014, helped in part by Alibaba Group Holding Ltd's record US$25 billion deal.
The funds raised in Hong Kong accounted for more than a third of the total amount for the entire Asia Pacific region, but were 13 per cent lower than a year ago, according to the data.
Overall, investment banks in Asia earned an estimated US$5.74 billion in fees from equity capital markets deals in 2015, with IPOs making up 36 per cent of the total, the data shows, a larger share than the 20 per cent of bank revenue in the United States.
Next year, more Chinese companies are set to raise funds through IPOs, the financial sector leading the pack, bankers said.
Companies expected to issue IPOs next year include state-backed Postal Savings Bank of China, which recently completed a US$7 billion pre-IPO financing round, Chinese online lending platform Lufax, backed by China's second largest insurer Ping An Insurance Group Co Ltd and Sinopec Sales, the marketing arm of China Petroleum and Chemicals Corp (Sinopec).
"The financial services sector will still be one of the key drivers, because the size of those deals are much larger than in consumer and manufacturing," said Louis Lau, partner at the Capital Markets Advisory Group at KPMG China.