Hong Kong IPO run falters in Q2 amid China’s tech clamp

New Hong Kong listings are tracking at their slowest pace since the aftermath of the global financial crisis, as weaker markets and China’s clampdown on its biggest tech firms chill sentiment.

Just seven companies have gone public in the second quarter so far – on track for the fewest since 2009, according to data compiled by Bloomberg.

First-day performances have also struggled: May’s initial public offerings – which includes warehouse and distribution company JD Logistics (2618) and property manager Central China Management (9982) – delivered the worst average debut performance in 15 months, the data show.

The cool-off comes as China slapped a record fine on Alibaba (9988) and ordered 34 of its largest tech companies to rectify any anti-competitive business practices. That’s making some firms more skittish about going public and investors worry about further actions from regulators.

Worries about rising inflation are also making tech firms going public a harder sell as investors dump shares with rich valuations. Beijing’s scrutiny on firms including technology and education has also forced investors to scale back earnings forecasts, investors say.

As a result, capital raised on the Hong Kong stock exchange this year is only half of its levels last year, impacting the city’s position as a top fundraising hub.

The test for whether Hong Kong’s IPO market can stage a revival will come from some upcoming listings.

China Youran Dairy, backed by dairy giant Inner Mongolia Yili Industrial, launches Hong Kong public sale today to raise up to HK$6.19 billion. And CARsgen Therapeutics, mainland pre-profit biopharmaceutical company, also opens its retail book today to raise as much as HK$3.1 billion, with a minimum investment of HK$16,565.26.

Meanwhile, mainland bubble tea chain operator Nayuki Holdings has received listing approval from the Hong Kong Stock Exchange for its IPO that could raise US$500 million (HK$3.89 billion). The Shenzhen-based firm said its net loss jumped more than 4.1 times to 203.3 million yuan (HK$246.59 million) last year, due to fair value changes of financial liabilities.

Separately, China SCE Group (1966) plans to spin off its property management services in Hong Kong.

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