Mainland China Companies' IPO Spree in US and Hong Kong Revives: Growth Expected Next Year

Mainland China Companies' IPO Spree in US and Hong Kong Revives: Growth Expected Next YearMultiple technology analysts predict an upsurge in IPO activity from Mainland China companies in the US and Hong Kong markets next year. This forecast is fueled by the success of several high-profile listings outside Mainland China this year, boosting investor confidence in the profitability and exit strategies of these companies after going public

Mainland China Companies' IPO Spree in US and Hong Kong Revives: Growth Expected Next Year

Multiple technology analysts predict an upsurge in IPO activity from Mainland China companies in the US and Hong Kong markets next year. This forecast is fueled by the success of several high-profile listings outside Mainland China this year, boosting investor confidence in the profitability and exit strategies of these companies after going public.

From Didi's Delisting to Regulatory Clarity

Since Didi's IPO in the summer of 2021, few large Chinese companies have opted for listing in New York. This phenomenon triggered greater scrutiny from both US and Chinese regulatory authorities on such listings. Didi, a leading ride-hailing platform, faced a temporary suspension of new user registrations shortly after its IPO and was eventually delisted within a year.

Subsequently, the US and Chinese regulators have clarified the procedures for Chinese companies listing in New York. However, international tensions and a constantly evolving market environment continue to significantly impact the number of Chinese companies going public in the US, leading to a significant decline.

Hong Kong Market: The Preferred Destination for Chinese Companies

This year, 42 companies have successfully listed on the Hong Kong Stock Exchange, with an additional 96 IPO applications currently under review or processing as of September 30th. Last week, Horizon Robotics, a leading Chinese company in artificial intelligence and automotive chips, and China Resources Beverage, a state-owned bottled water giant, completed their listings in Hong Kong. These two IPOs became the largest among Hong Kong listings this year (excluding companies listed in Mainland China).

Multiple Companies Plan to Go Public in Hong Kong

Renaissance Capital also revealed that SF Express, a leading Chinese courier company, plans to list in Hong Kong next month, while Chinese automaker Chery is targeting a listing next year. However, George Chan, EY's Global IPO Leader, noted that the overall pace of Hong Kong's IPO market this year has been slightly lower than initial expectations. He highlighted that the fourth quarter is generally not an ideal period for listings and predicted that most companies would likely wait until at least next February to go public.

Increased Investor Confidence in China's Stock Market: Hong Kong as a Testing Ground

Thanks to the announcement of economic stimulus plans by China, investor confidence in the Chinese stock market has significantly improved over the past few weeks. Coupled with a low-interest rate environment, which makes investing in stocks more attractive compared to bonds, the Hang Seng Index has rebounded by over 20% this year after four consecutive years of decline.

Reuben Lai, Vice President of Private Capital at Preqin, a leading global alternative asset data and market analysis platform, pointed out that numerous Chinese companies listing in Hong Kong see it as an opportunity to gauge investor interest in listings in other countries.

US Market: Deep Roots Still Attract Companies

Ellis analyzes, "Increased international tensions have further solidified Hong Kong's position as the preferred listing destination. However, the deep roots and extensive influence of the US capital market still encourage numerous companies to seriously consider New York as a listing location, particularly those focusing on advanced technologies but yet to achieve profitability. These companies sometimes believe that their business models and growth stories resonate better with US investors."

Foreign Company IPOs in the US Reach a 20-Year High

According to EY data, foreign companies accounted for over 50% of IPOs on US exchanges since 2023, reaching a 20-year high. EY's list of major cross-border IPOs reveals that Zeekr, an electric vehicle manufacturer backed by Geely Group, and China-owned A-Ma-Fen Sports both successfully entered the US capital market earlier this year.

Positive Implications of Chinese Companies' IPOs in US and Hong Kong

The revival of IPO markets in the US and Hong Kong for Mainland China companies undoubtedly provides a crucial avenue for numerous funds to realize returns from their early investments in startups. In recent years, the decline in IPO numbers has deterred investors from supporting startups.

Reuben Lai of Preqin states that investors are turning their attention back to China after successfully deploying capital in India and the Middle East recently. He emphasizes, "From this point forward, I believe China possesses even greater potential, indicating positive developments in terms of capital repatriation, company valuations, improved exit environment, and fund performance."

Conclusion

The resurgence of IPO activity from Mainland China companies in the US and Hong Kong markets reflects their confidence in international capital markets and offers essential exit pathways for numerous funds. As China's economy continues to grow, the IPO frenzy from Chinese companies in the US and Hong Kong is expected to persist, injecting new vitality into the development of China's capital market.