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IPO deals in Greater China and the Asia-Pacific have seen a substantial YoY slump, but are better than the broader global market.
The Greater China region has seen a 28% decline in initial public offering (IPO) listings following a spike in Omicron cases. Hong Kong, in particular, experienced a relatively slower pace of IPO activity than mainland China according to reports.
Apart from a severe outbreak of Omicron cases, recent market volatility also caused the slump. In addition, Hong Kong saw a relatively more pronounced plunge in the local stock market indices. The special administrative Chinese region had only 12 IPO deals, representing a fall of over 60% compared to a year ago.
Breakdown of The Current Greater China IPO Tapestry
Despite the current unsavory optics for IPOs in Greater China, the region still fared better than other global markets. The IPO performance in the Asia-Pacific region follows the general underperformance of Chinese tech shares in the last year. Much of this might be because of Beijing’s crackdown on major tech players in the country and ongoing tensions with the US. Currently, the Hang Seng Tech index is down by approximately 44% YoY. In addition, the benchmark Hang Seng index is down 22% compared to a year ago.
Although there was a general decline in the number of IPOs in Greater China, proceeds from listings climbed a little. Reports put this rise at 2% compared to a year ago, or a $30.1 billion increment YoY. Mainland China, in particular, was the main beneficiary of the increase in the listing proceeds. This is because the territory hosted three of the seven mega IPOs in the first quarter of 2022.
Overall, proceeds from IPO listings in the Asia-Pacific grew by 18%. Conversely, there was also a 37% year-on-year drop in first-quarter IPO listings in the Asia-Pacific region. This percentage drop accounts for around 321 listings. By comparison, global IPOs plummeted nearly 51% for the same period while raising $54.4 billion in proceeds between January and March 2022.
Data reports also suggest a substantial drop in special purpose acquisition vehicle (SPAC) IPOs. Furthermore, there was also a sharp decline in mega listings ($1 billion or more in valuation).
EY Posits Reasons for Current Global IPO Underperformance
According to data consultancy platform EY, the overall global tumble in IPOs is a far cry from record highs in 2021. The data aggregator also provided several reasons for the remarkable reversal. These include increasing geopolitical tensions, stock market volatility, and price correction in overvalued stocks from recent IPOs. In addition, EY also stated more plausible reasons for the drop. These include growing concerns over the increase in commodity and energy prices, anticipated inflation interest rate hikes, and Covid. The pandemic, including fresh outbreaks, and at-risk zones, continues to impede a full global economic recovery.
EY also stated that because of “market uncertainty and instability,” several planned IPO launches were postponed.