Chinese mainland jewellery retailer Laopu Gold showed a surprising turn of speed at its IPO launch on Friday - at one point surging 86.7% on its offer price of HK$40.5 – in a result that had many heralding the return of Hong Kong’s once stellar IPO market.
According to law firm O’Melveny, which acted as Laopu Gold’s Hong Kong and US counsel, the total offering size was approximately HK$905 million (US$116 million) after full exercise of the offer size adjustment option.
The firm told Finance Asia that Tencent, China Southern Asset Management and CPE Fund were the cornerstone investors for the IPO, collectively snapping up US$56 million worth of shares, for an issue that ultimately finished 582 times oversubscribed.
The IPO for the heritage gold retailer – a Chinese handcrafted gold jewellery brand that claims to use ancient Chinese gold craftsmanship techniques “to achieve meticulous details” – comes as gold prices have spiked over the past two years.
Amid ongoing geopolitical tensions, gold broke the psychologically critical $2000-per-ounce mark last year, gaining more than 15% in 2024 alone.
While the IPO may have surfed the wave of gold’s resurgence, other strong debuts last week including Tianju Dihe, a data services provider backed by JD.com, have market analyst cautiously calling the revival of Hong Kong’s anaemic IPO market.
18C heralds new chapter
In particular, hopes are high for Hong Kong’s Chapter 18C listing regime for specialist technology industries which covers companies engaged in next-generation information technology such as cloud-based services and artificial intelligence.
According to PWC, if market sentiment continues to improve in the second half of 2024, it expects to see around 80 companies list in Hong Kong in 2024 to achieve overall funding of around HK$70-80bn, many them in the technology, media and telecommunications (TMT) sector.
Some IPOs in Hong Kong, it predicts could even broach the HK$5bn mark.
“With interest rates expected to fall in the second half of the year, Hong Kong's capital markets are poised for a resurgence,” Eddie Wong, PwC Hong Kong Capital Market Leader said in a media release.
“The anticipated listing of Chinese concept stocks and technology companies, especially in the form of specialist technology companies, is expected to contribute to stability and confidence in the city's capital market.”
“In particular, the implementation of the new Chapter 18C listing regime will play a pivotal role, helping to connect these high-growth technology companies with investors and bringing new opportunities to both corporates and the Hong Kong stock market.”
Any reversal, however, comes against the backdrop of a lacklustre start for Hong Kong IPOs in 2024. In the first half of the year, total funds raised on the Hong Kong market reached HK$13.1 billion – a 27% drop year-on-year.
New CSRC measures
KPMG also holds out high hopes for Hong Kong’s Chapter 18C in its latest Chinese Mainland and Hong Kong IPO Markets 2024 mid-year review saying that during the second quarter Hong Kong welcomed its first IPO under Chapter 18C, featuring a company equipped with an AI-powered drug research platform.
It points towards a healthy IPO pipeline, new measures from the China Securities Regulatory Commission (CSRC) aimed at enhancing connectivity between China’s capital markets, and a growing coterie of AI, new energy and cloud-based listings.
“There is a newfound positivity in the Hong Kong IPO market as evidenced by the surge in IPO applicants,” Irene Chu, Partner, Head of New Economy and Life Sciences, Hong Kong, KPMG China said in a release.
“This upsurge has been supported by the CSRC's five measures and A-share applicants switching their IPO plans to Hong Kong. In light of this, we maintain a positive outlook for IPO activities to pick up in the second half of 2024.”
