October 17, 2023
BEIJING – Indonesian courier services provider J&T Global Express is set to launch Hong Kong’s second-largest initial public offering (IPO) this year, as the city’s fund-raising market is expected to rebound in the second half of 2023 when macroeconomic and geopolitical fundamentals improve along with stock market reforms.
J&T will issue 327 million shares globally at a price of HK$12 ($1.53) per share to raise up to $500 million, down 50 percent from the $1 billion it was rumored to raise. Its valuation has also been cut by 35 percent from about $20 billion to $13 billion.
Even though more Chinese mainland companies are expected to pursue listings in Hong Kong where economic recovery is still underway, Deloitte China has indicated Hong Kong’s IPO market could hit an 11-year fundraising low in 2023
The fund-raising proceed and valuation target have both been short of market expectation due to sluggish market conditions and weak investor demand, exacerbated by inflationary pressure, interest rate hikes, geopolitical uncertainties, financial market instability, and slow post-pandemic recovery.
The J&T IPO will be the second-largest in Hong Kong this year after mainland spirit maker ZJLD Group’s $675 million listing in April.
J&T’s IPO starts on Monday (Oct 16) and will end on Thursday (Oct 19) and share-trading is expected on Oct 27. Entry fee per board lot of 200 shares is HK$2,400.
“The stock market remained weak in the third quarter this year and so did stock valuations because of macroeconomic developments in particular around US interest rate hikes,” argued Robert Lui, Southern Region Hong Kong offering services leader at Deloitte China’s Capital Market Services Group.
“The US Federal Reserve has indicated another rise later this year and it is set to maintain a high interest rate for a longer time. This will add uncertainty and affect the listing windows of potential issuers in Hong Kong,” Deloitte China Southern Region Managing Partner Edward Au added.
Even though more Chinese mainland companies are expected to pursue listings in Hong Kong where economic recovery is still underway, Deloitte China has indicated Hong Kong’s IPO market could hit an 11-year fundraising low in 2023.
Other analysts are more optimistic. “The US Federal Reserve’s recent announcement to halt its rate hike is expected to reduce monetary uncertainty, which could motivate IPO participants to pick up their pace in the second half of this year,” argued Paul Lau, partner and head of capital markets and professional practice at KPMG China.
KPMG China expects IPO candidates in Hong Kong in the second half of this year will be spin-offs from international and mainland companies, as well as specialist technology companies.
Experts reckon that recent enhancements to the stock connect programs, the introduction of the listing regime for special purpose acquisition companies, the launch of renminbi-Hong Kong dollar dual counter model, Hong Kong Exchanges and Clearing’s various agreements signed with overseas exchanges, the upcoming launch of FINI (Fast Interface for New Issuance) for IPO settlement, as well as the city’s unique advantages such as being the world’s largest offshore renminbi hub, together with free flow of capital with access to international investors, could lead to a rebound in the city’s IPO market.
During Chief Executive John Lee Ka-chiu’s ASEAN trip in July this year, HKEX signed a memorandum of understanding with the Indonesia Stock Exchange, enabling both sides to collaborate in seeking opportunities arising from cross-border listings in the Hong Kong and Indonesian markets.
Andy Maynard, head of equities at China Renaissance Securities, argued that “a dual-primary or secondary listing in Hong Kong by ASEAN firms would allow these companies to attract interest more easily from Hong Kong, Chinese mainland and global investors.”
“Dual-primary or secondary listings can access a greater spread of investors, both institutional and retail, and enjoy greater profiling and research coverage,” Maynard said, adding that the southbound mutual market access mechanism – allowing mainland investors to invest in eligible Hong Kong-listed equities – would be the strongest draw for ASEAN corporates to consider a secondary or dual-primary listing status in Hong Kong.
Other global logistics companies are also rushing to pursue IPO in Hong Kong. Cainiao Smart Logistics Network, the logistics arm of mainland technology titan Alibaba Group Holdings, and mainland-listed SF Holding, have also filed for Hong Kong listing earlier to raise up to $1 billion and up to $3 billion, respectively.