KPMG China has just released its Chinese Mainland and Hong Kong Initial Public Offering (IPO) 2023 mid-year review. IPOs remain important liquidity events that the wealth industry tracks.

Global IPO activities remained weak in the first half of 2023 amid a challenging market, but the Hong Kong IPO market demonstrated its resilience, recording slight increases in both the number of deals and total funds raised in the first half of 2023, compared with the same period of 2022, a new report by KPMG China reveals.

With a stable IPO pipeline and the new listing regime for specialist technology companies, the Hong Kong IPO market is poised for a rebound in the second half of the year, the firm said in a statement.

Initial public offerings, along with mergers, acquisitions and business inheritances, are important liquidity events, minting new high net worth individuals when firms float. IPOs are tracked by wealth managers seeking new clients as well as learning about the wealth of existing ones. 

Inversely, global IPO activities fell by about 10 per cent and 40 per cent in the number of deals and total funds raised in the first half of 2023 respectively, where inflationary pressure, interest rate hikes, geopolitical uncertainties, financial market instability, and sluggish post-pandemic recovery delayed IPO plans, the firm continued. 

The Shanghai Stock Exchange and Shenzhen Stock Exchange continued to outpace their global peers in terms of both funds raised and number of deals, contributing to over 50 per cent of global IPO funds raised, and ranking first and second respectively among all listing venues across the globe in the first half of 2023, the report shows. 

"Global IPO activity slowed significantly towards the end of 2022, and has remained sluggish in 2023,” Paul Lau, partner, head of capital markets and professional practice, KPMG China, said.

β€œHowever, there are indications that the situation may be improving. The US Federal Reserve's recent announcement to halt its rate hike is expected to reduce monetary uncertainty, which could motivate IPO applicants to pick up their pace in the second half of 2023," he continued.

Hong Kong IPO activities started the year off slowly but they were able to recover their footing in the second quarter by completing IPO deals with average deal sizes more than double those of the first quarter of 2023. IPO deals increased by 30 per cent to 31 deals compared with the first half of 2022, the firm said.

The Specialist Technology Companies regime became effective on 31 March 2023, and an IPO application under the regime was filed in the second quarter, marking the first of many more to come.

"The new Chapter 18C is designed to help companies with specialist technology (such as artificial intelligence, robotics and automation, as well as semiconductors) gain access to Hong Kong's deep pool of capital, in order to develop and commercialise their technology to a widespread audience. In the long term, we are hopeful for major growth in the IPO markets driven by new technologies," Irene Chu, partner, head of new economy and life sciences, Hong Kong, KPMG China, said. 

Looking ahead, KPMG said it expects to see a number of spin-off IPOs from both international and Chinese Mainland companies, as well as a number of specialist technology companies to appear in the coming quarters. Alongside a stable pipeline of over 110 active applicants, Hong Kong is poised for a major rebound in the second half of 2023, the firm concluded.