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IPO Deals in China and Hong Kong Slump as Omicron Cases Jump

Chan Long Hei | Bloomberg | Getty Images
  • Greater China overall had a 28% drop in the number of initial public offerings, although IPO activity in Hong Kong was slower compared to mainland China, data from consultancy EY showed.
  • "Hong Kong saw notably slower IPO activity due to recent market volatility, a severe outbreak of Omicron cases and a relatively bigger fall in the local stock market indices," said EY in a report.
  • The decline in Asia-Pacific was less severe compared to IPOs globally – with a fall of 37% in the first quarter compared to a year ago, or 321 listings.

The number of public listings in greater China fell significantly in the first quarter of the year, but still performed better than other global markets, data from consultancy EY showed.

Greater China overall had a 28% drop in the number of initial public offerings, although IPO activity in Hong Kong was slower compared to mainland China.

"Hong Kong saw notably slower IPO activity due to recent market volatility, a severe outbreak of Omicron cases and a relatively bigger fall in the local stock market indices," said EY in a report.

Hong Kong had just 12 IPO deals, a drop of over 60% compared to a year ago.

Chinese tech shares have plummeted over the past year, hit by China's regulatory crackdown and ongoing tensions with the U.S. The Hang Seng Tech index is down around 44% compared to a year ago, while the benchmark Hang Seng index has fallen about 22% in the same period.

"While Mainland China also saw a small decline in deal numbers, proceeds rose [year-on-year] due to hosting three of the seven mega IPOs in Q1 2022," the firm said.

While the number of IPOs fell, proceeds from the overall greater China listings rose slightly — by 2% compared to a year ago, or $30.1 billion.

The tumble in listing activity in China and Hong Kong followed a similar trend in the rest of Asia-Pacific, where IPOs also fell — but not as steeply, at 16% year-on-year. IPO proceeds in Asia-Pacific rose by 18%.

'Sudden reversal' from record highs last year

The decline in Asia-Pacific was less severe compared to IPOs globally – with a fall of 37% in the first quarter compared to a year ago, or 321 listings. Global IPOs raised $54.4 billion in proceeds from January to March this year, a drop of 51% in the same period.

The overall tumble worldwide was a turnaround from record highs in 2021 at 2,436 IPOs, according to EY.

"The sudden reversal can be attributed to a range of issues," EY said. They include rising geopolitical tensions, stock market volatility, as well as price correction in over-valued stocks from recent IPOs.

EY also attributed the drop to growing concerns about rising commodity and energy prices, the impact of inflation and potential interest rate hikes; as well as the "COVID-19 pandemic risk continuing to hold back a full global economic recovery."

In line with the sharp decline in global IPO activity, there was also a "considerable" fall in SPAC IPOs — the public listing for special purpose acquisition companies.

Mega listings, which EY defined as having proceeds of more than $1 billion, also fell. It said there were also a number of IPO launches postponed due to "market uncertainty and instability."

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