Fundraising in a difficult market: a Hong Kong perspective

October 17, 2022

Overview of the latest capital market trends in Hong Kong

In line with global trends, fundraising activity slowed markedly in Hong Kong during the first half of 2022. Total proceeds raised from such activity decreased by 92 percent, as compared to the corresponding period in 2021, to the lowest amount raised during the first half of any year since 2009. There were a total of 22 new primary listings in the first half of 2022 (a 53 percent decrease, as compared to the same period in 2021).

However, despite the current challenging conditions, a number of factors indicate the possibility of increased fundraising activity and opportunities for issuers and potential investors in Hong Kong in the coming periods

Recovery of market sentiment and return of larger IPOs in Hong Kong

To date in the second half of 2022, the Hong Kong market has witnessed a trend of larger listings and book-building exercises, including the listings of Tianqi Lithium Corp. (US$1.7 billion) in July 2022 and China Tourism Group Duty Free Corp. (US$2.1 billion) in August 2022, as well as the recently completed listings of Zhejiang Leapmotor Technology Co., Ltd and Onewo Inc., which raised an aggregate of up to approximately US$1.5 billion. In addition, the Hong Kong Stock Exchange’s (the “HKEX”) 2022 Interim Results note that the IPO pipeline remains robust with over 180 active applications as of 30 June 2022.

The ongoing cooperation between the HKEX, Shanghai Stock Exchange and Shenzhen Stock Exchange under the “Stock Connect” program also provides a much-needed liquidity boost for the HKEX by allowing mainland China investors to engage in the Hong Kong stock markets, which, in turn, increases the attractiveness of the HKEX as a listing venue. In August 2022, it was announced that an enhancement to the Stock Connect program to enable trading under Stock Connect on all trading days when both the Hong Kong and mainland China markets are open, would be implemented. The potential increase in investment activities caused by this enhancement could help to facilitate the recovery of the Hong Kong stock market and, in turn, improve overall market sentiment in Hong Kong.

Recent reform of the listing regime in Hong Kong

In April 2018, the HKEX implemented certain listing reforms to: (i) permit listings of pre-revenue biotech companies and new economy companies with weighted-voting rights structures; and (ii) establish a new concessionary secondary listing route for Greater China issuers and non-Greater China issuers. As a result of the 2018 reforms, Hong Kong has seen an increasing number of U.S.-listed Greater China issuers seeking “homecoming” secondary listings, most notably the first secondary listing of an innovative company, Alibaba Group Holding, which remains the largest IPO in Hong Kong since 2018 and raised approximately HK$12.9 billion. Around half of the 200+ companies newly listed in Hong Kong since the implementation of the 2018 reforms have been from the healthcare sector.

With a view to further enhancing and streamlining the listing regime in Hong Kong, in January 2022, the HKEX introduced a new listing framework to enable Greater China issuers without weighted voting rights structures to pursue a secondary listing in Hong Kong without needing to demonstrate that they are an innovative company and with lower minimum market capitalization requirements at listing. In addition, both grandfathered Greater China issuers and non-Greater China issuers eligible for secondary listings with existing weighted-voting rights structures are now able to opt for a dual primary listing. This continued reform of the listing regime may further enhance the strong pipeline of “homecoming” secondary listings and contribute to the overall liquidity of the Hong Kong stock market.

Despite an agreement on audit cooperation in August 2022 between the China Securities Regulatory Commission and the U.S. Public Company Accounting Oversight Board, which grants the U.S. Public Company Accounting Oversight Board access to Chinese audit data (minimizing the delisting risk for these U.S.-listed Greater China companies), ongoing tensions between the United States and China remain a concern for potential and current issuers. However, an increase in “homecoming” secondary listings activities from U.S.-listed Greater China companies still looks possible based on current activity, including the recent secondary listing of Tencent Music Entertainment Group in September 2022.

The Special Purpose Acquisition Company (SPAC) listing regime

In January 2022, the HKEX established a new listing regime for SPACs. The new SPAC listing regime has unique features, including that listing applications need to be sponsored by experienced and reputable SPAC promotors, and any distributions can be made only to institutional professional investors. Similar to other SPAC listing regimes, the SPAC is required to acquire its target within a predefined time period after listing.

Since the introduction of the new SPAC listing regime, and despite difficult market conditions, there have been 13 SPAC applications and four successful SPAC listings in Hong Kong. The new listing regime provides an attractive alternative route to listing in Hong Kong, especially given the uncertainties in the market environment at the time of offering of a traditional IPO, and aims to provide adequate protection to investors. SPAC activity is expected to further increase with the improvement of market sentiment, particularly when a SPAC listing track-record has been established.

Increasing emphasis placed on CG, diversity and ESG issues in fundraising activities

Investors are increasingly focusing on corporate governance (“CG”), diversity and environmental, social and governance (“ESG”) considerations in their investment decisions. Accordingly, and in light of the global direction towards developing a sustainable financial ecosystem, the HKEX now places greater emphasis on disclosures in relation to CG, diversity and ESG issues, including board oversight and involvement, board diversity and policy and governance by listing applicants in their IPO applications and disclosure documents.

According to the U.S. SIF Foundation’s 2020 trends report, there has been significant expansion in sustainable investing in the United States. Total U.S.-domiciled assets under management using sustainable investing strategies grew from US$12.0 trillion at the start of 2018 to US$17.1 trillion at the start of 2020 (an increase of 42 percent). This represents 33 percent, or one in three dollars, of the US$51.4 trillion in total U.S. assets under professional management.

In Hong Kong, the Securities and Futures Commission (the “SFC”), the fundraising market watchdog, has also recently published its Agenda for Green and Sustainable Finance, where the SFC highlights that

“[the] extremely large footprint and international significance of Hong Kong’s HK$39.1 trillion capital markets means that it will play a critical role in overall global efforts to reach net-zero goals; and PRC President Xi Jinping announced the Mainland’s “Dual Carbon” goals of peak carbon emissions by 2030 and achieving carbon neutrality by 2060. The Outline of the 14th Five-Year Plan for the National Economic and Social Development and the Long-Range Objectives Through the Year 2035 released in March 2021 reiterated these goals and set out actions to achieve green growth, including accelerating the development of non-fossil energy resources.”

As such, there is potential growth in Mainland China and Hong Kong in terms of green investment.


The recent and ongoing reforms and introduction of new features in Hong Kong’s listing and regulatory framework are intended to provide greater flexibility and more wide-ranging fundraising regimes to attract potential issuers to list in Hong Kong despite the recent downturn in the economic environment and low stock market liquidity. It is hoped that the implementation of these new measures will lead to an uptick in fundraising activities in Hong Kong in the near future and ensure that Hong Kong is positioned to take advantage of any future recovery of the global economy.

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