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IPOs in China and Hong Kong down amid soaring omicrons and stock volatility

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The number of public listings in Greater China fell significantly in the first quarter of the year, but still performed better than other global markets, according to data from consultancy EY.

Overall, Greater China saw a 28% drop in the number of IPOs, although IPO activity in Hong Kong was slower than in mainland China.

“Hong Kong has seen a noticeable slowdown in IPO activity due to recent market volatility, a severe outbreak of Omicron cases, and a relatively larger drop in local equity indices,” said EY in a report.

Hong Kong saw just 12 IPOs, down more than 60% from a year ago.

Chinese tech stocks have fallen over the past year, hit by China’s regulatory crackdown and ongoing tensions with the United States. The Hang Seng Tech index is down around 44% from a year ago, while the benchmark Hang Seng index is down around 22% in the same period.

“While mainland China also saw a slight decline in the number of transactions, the product increased [year-on-year] due to hosting three of the seven mega IPOs in the first quarter of 2022,” the company said.

While the number of IPOs declined, overall listing proceeds in China increased slightly – by 2% from a year ago, or $30.1 billion.

The drop in listing activity in China and Hong Kong followed a similar trend in the rest of Asia-Pacific, where IPOs also fell – but not as sharply, at 16% year-on-year. Asia Pacific IPO proceeds increased 18%.

“Sudden reversal” from last year’s records

The drop in Asia-Pacific was less severe compared to IPOs globally – with a 37% fall in the first quarter compared to a year ago, or 321 listings. Global IPOs raised $54.4 billion from January to March this year, down 51% over the same period.

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The overall fall worldwide was a reversal from 2021’s record highs of 2,436 IPOs, according to EY.

“The sudden reversal can be attributed to a series of issues,” EY said. They include rising geopolitical tensions, stock market volatility, as well as the correction in overvalued stock prices following recent IPOs.

EY also attributed the decline to growing concerns about rising commodity and energy prices, the impact of inflation and potential interest rate hikes; as well as the “risk of a COVID-19 pandemic which continues to hamper a full global economic recovery”.

Along with the sharp drop in global IPO activity, there has also been a “significant” drop in IPOs from SPAC – the public listing of special purpose acquisition companies.

Mega listings, which EY defined as having more than $1 billion in proceeds, also fell. He added that a number of IPO launches had also been postponed due to “market uncertainty and instability”.