An absence of big-ticket listings contributed to a dramatic 79.4 per cent decline in stock market proceeds during the first quarter as deal makers focused on far juicier merger and acquisition transactions. The slump in activity may be seized upon by lobbyists now calling for a relaxation of the exchange's listing rules.
Earlier this month, Hong Kong's chief regulator, the Securities and Futures Commission, dropped its previous opposition to any change in the current "one share one vote" rules, saying a dual-share structure could be allowed under certain conditions.
The on-off debate over shareholder rights was reignited last year after Alibaba Group Holding passed over Hong Kong in favour of New York for its record-breaking US$25 billion listing. In Hong Kong in the first quarter, companies raised US$7.9 billion in the equity markets, including listings and follow-on deals, headlined by broadband service provider Hong Kong Broadband Network's US$748.4 million listing, a 33.8 per cent decline from the year-earlier period, according to preliminary data by Thomson Reuters.
It was the lowest first-quarter period for Hong Kong equity capital market listings since 2011, while capital raised through listings alone was only US$1.2 billion, a 79.4 per cent drop on last year and an amount equivalent to Harbin Bank's flotation in March last year.
"People are still uncertain of what the new norm will be. We don't expect this year to reach the peaks of 2011 but the market is getting stronger," said Austin Sweeney, Asia corporate head at lawyers Herbert Smith Freehills.
"Hong Kong, usually a powerhouse for large China listings, had a slow start this year," wrote EY analysts in a recent report. "This may have been partially due to the late Lunar New Year causing a delay as companies waited for their year-end numbers before coming to market."
Debt markets also weakened as dim sum bond proceeds dropped 58.8 per cent year on year with appetite for offshore yuan weakening after headline defaults and concerns about China's economic health.
Analysts say there is still a full deal pipeline for the year ahead, with more than 50 companies lined up for a main-board listing, including GF Securities' potential US$3 billion share offering, and Fuyao Glass Industry, which wants to raise about US$895.4 million.
First-quarter merger and acquisition activity, at US$85.2 billion, was up a record 187.7 per cent, led by Cheung Kong's corporate restructuring and the confirmed takeover of British phone operator O2 by Hutchison Whampoa.
Hong Kong's exchange captured 10.3 per cent of regional listings in the first quarter, down 81.1 per cent year on year, said Thomson Reuters. Shanghai was top, with more than US$5 billion raised in listings, equal to 45.4 per cent of the region's proceeds from flotations.
Source:http://www.scmp.com/business/banking-finance/article/1750431/hong-kong-deal-makers-eschew-new-listings-favour-ma-spoils
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