By
Godfrey Benjamin
March 28th, 2024
Despite the raging impact of inflation in different economies, monetary authorities have not been sitting on their oars, rather, they have been fighting the surge through consistent interest rate hikes.
The Hong Kong Initial Public Offering (IPO) market has failed to get lifted from its dampened sentiment after the listing of Chinese liquor company ZJLD Group failed relatively. As reported by CNBC, the shares of ZJLD Group tumbled as hard as 18% on its first day of trading back on April 27, showcasing how much lack of confidence exists in the industry.
Last year was a very turbulent year for the global financial ecosystem as skyrocketing inflation rocked almost every economy. With fiat currencies losing their intrinsic value, many investors went on the sidelines, pursuing safe assets that can at least help preserve capital. While most stock markets saw a battery over the past year, Hong Kong’s was particularly of interest.
Known as a major financial hub in the Asia-Pacific region, the slow growth of the stock market shows the economy is far from rebounding to normal levels.
“The sentiment in the IPO markets has not built up yet,” Ringo Choi, Asia-Pacific IPO leader at EY said in a statement, adding that “a lot of industries are suffering at the moment.”
Choi noted that the tech firms in Hong Kong are experiencing major pressure from the US-China economic and trade tensions. Additionally, he believes the poor outlook also stems from the falling prices for electric vehicles in the region.
Since the pandemic, the valuations of companies have been dwindling and the current economic climate is making it impossible to revisit these impressive levels anytime soon.
“Valuations at this moment have not picked up as compared to two to three years ago. We still need some time,” said Robert Lui, Hong Kong offering leader of Deloitte China’s Capital Market Services Group.
Impact of Interest Rate Hikes on the Hong Kong IPO Market
Despite the raging impact of inflation in different economies, monetary authorities have not been sitting on their oars, rather, they have been fighting the surge through consistent interest rate hikes. With the Hong Kong stock and IPO market, in general, down by 15% in 2022, it was considered one of the worst performers for the year.
One of the key factors that experts have highlighted is the impact of China’s zero-Covid policy as well as the uncertainty that comes with interest rate hikes.
“The concern is still about the high-interest rate environment and a lot of the attention in the Greater China region is about the recovery of the economy,” said Irene Chu, Partner at KPMG China.
Despite this gloomy outlook, experts are bullish that the year 2023 will mark a major turnaround for the Hong Kong stock market. This bullish sentiment is notably shared by the trio of Deloitte China, EY, and KPMG. This assurance stems from the fact that the Chinese and Hong Kong borders are now reopening for business with more relaxed rules that can generally bolster growth in the short to mid-term.