Hong Kong IPO Market Hit Hard by China's Regulatory Crackdown

3Q IPO Size $6.2 Billion...Lowest Since 2Q Last Year

[Asia Economy Reporter Jo Yujin] Bloomberg reported on the 17th (local time) that the comprehensive regulations imposed by Chinese authorities are hitting investor sentiment in the Hong Kong stock market, Asia's financial hub, and causing a slump in the initial public offering (IPO) market.

According to the report, the IPO scale (based on public offering amount) of the Hong Kong stock market in the third quarter of this year recorded $6.2 billion (approximately 7.3346 trillion KRW). This is the lowest since the second quarter of last year and is even lower than the Korean stock market ($10.4 billion) for the first time in four years.

In the first half of this year, the total public offering amount of the Hong Kong stock market enjoyed a super boom, recording the highest level in the past 10 years. The IPO scale of the Hong Kong stock market in the first and second quarters of this year exceeded $37.7 billion, showing remarkable performance.

However, the situation reversed sharply in the third quarter. Major Chinese companies that had led the Hong Kong IPO market began to give up or delay their listings due to comprehensive regulations from government authorities.

Chinese authorities are strengthening crackdowns comprehensively, including platform companies, private education, and gaming sectors. Since these regulations are closely related to maintaining the Chinese system, there are growing concerns that the government may tighten control over companies even at the cost of economic sacrifice.

For example, WeDoctor, a Chinese digital healthcare platform that planned to raise $3 billion through an IPO this year, temporarily withdrew its IPO push due to data security-related regulations from authorities.

WeDoctor, which received investment from Tencent, plans to resume the listing process after resolving uncertainties related to financial status and data security regulations raised by Chinese authorities, but it is unknown when this will happen.

WM Technology, which operates local Chinese retail stores U-Mart and Metro AG, also planned to raise $1 billion through an IPO this year but has suspended the IPO process due to regulatory obstacles regarding its business operations. A WM Technology official said, "At present, we do not plan to actively pursue the IPO."

Experts believe that the industrial regulations targeting platform, private education, and gaming industries, launched ahead of Chinese President Xi Jinping's re-election, are expanding to real estate, healthcare, finance, and domestic companies, and thus the impact on the IPO market is expected to be prolonged.

Justin Tang, Head of Asia at United First Partners in Singapore, said, "Consumer, technology, and real estate companies will face headwinds due to the Chinese government's national policy centered on ‘common prosperity’ and the strengthening of industrial regulations for this purpose."

This content was produced with the assistance of AI translation services.