Chinese IPOs in the U.S., Hong Kong to rise next year, analysts say

BEIJING — Chinese language IPOs within the U.S. and Hong Kong are set to extend subsequent yr, analysts stated, as some high-profile listings exterior the mainland this yr elevate investor optimism over worthwhile exits.

Chinese language autonomous driving firm WeRide listed on the Nasdaq Friday with shares rising practically 6.8%. Earlier this month, Chinese language robotaxi operator Pony.ai additionally filed paperwork to listing on the Nasdaq. Each firms have lengthy aimed to go public.

Few giant China-based firms have listed in New York because the Didi IPO in the summertime of 2021 elevated scrutiny by U.S. and Chinese language regulators on such listings. The Chinese language ride-hailing firm was compelled to quickly droop new person registrations, and bought delisted in lower than a yr.

U.S. and Chinese language authorities have since clarified the method for a China-based firm to go public in New York. However geopolitics and market modifications have considerably diminished U.S. IPOs of Chinese language companies.

“After a few gradual years, we typically anticipate the IPO market to revive in 2025, bolstered by rate of interest decreases and (to some extent) the conclusion of the U.S. presidential election,” Marcia Ellis, Hong Kong-based international co-chair of personal fairness observe, Morrison Foerster, stated in an electronic mail.

“Whereas there’s a market notion of regulatory points between the U.S. and China as being problematic, lots of the points driving this notion have been solved,” she stated.

“Chinese language firms have gotten more and more eager about getting listed in Hong Kong or New York, as a result of issue in getting listed in Mainland China and strain from shareholders to rapidly obtain an exit.” 

This yr, as many as 42 firms have gone public on the Hong Kong Inventory Change, and there have been 96 IPO purposes pending itemizing or beneath processing as of Sept. 30, in response to the trade’s web site.

Final week, Horizon Robotics — a Chinese language synthetic intelligence and auto chip developer — and state-owned bottled water firm CR Beverage went public in Hong Kong.

The 2 had been the trade’s largest IPOs of the yr, excluding listings of firms that additionally commerce within the mainland, in response to Renaissance Capital, which tracks international IPOs. The agency famous that Chinese language supply large SF Specific is planning for a Hong Kong IPO subsequent month, whereas Chinese language automaker Chery goals for one subsequent yr.

Nonetheless, the general tempo of Hong Kong IPOs this yr is barely slower than anticipated, George Chan, international IPO chief at EY, instructed CNBC in an interview earlier this month.

He stated the fourth quarter is mostly not a superb interval for listings and expects most firms to attend till no less than February. In his conversations with early stage traders, “they’re very optimistic about subsequent yr” and are getting ready firms for IPOs, Chan stated.

The deliberate listings are typically life sciences, tech or client firms, he stated.

Investor sentiment on Chinese language shares has improved over the previous few weeks because of high-level stimulus bulletins. Decrease rates of interest additionally make shares extra enticing than bonds. The Dangle Seng Index has surged over 20% up to now this yr after 4 straight years of declines.

Many Chinese language firms that listing in Hong Kong additionally see it as a solution to take a look at traders’ urge for food for an IPO in a foreign country, stated Reuben Lai, vice chairman, personal capital, Higher China at Preqin.

“Geopolitical tensions make Hong Kong a most popular market,” Ellis stated, “however the depth and breadth of US capital markets nonetheless make many firms severely take into account New York, particularly for these that concentrate on superior know-how and are usually not but worthwhile, who typically consider that their fairness tales will probably be higher obtained by U.S. traders.”  

Simply over half of IPOs on U.S. exchanges since 2023 have come from foreign-based firms, a 20-year excessive, in response to EY.

Geely-backed Chinese language electrical automotive firm Zeekr and Chinese language-owned Amer Sports activities each listed within the U.S. earlier this yr, in response to EY’s listing of main cross-border IPOs.

Chinese language electrical truck producer Windrose stated it intends to listing within the U.S. within the first half of 2025, with a twin itemizing in Europe later that yr. The corporate, which goals to ship 10,000 vans by 2027, on Sunday introduced it moved its international headquarters to Belgium.

A restoration in Chinese language IPOs within the U.S. and Hong Kong may help funds money out on their early stage investments in startups. The shortage of IPOs had diminished the motivation for funds to again startups.

Now, traders are taking a look at China once more, after lately deploying capital to India and the Center East, Preqin’s Lai stated. “I am undoubtedly seeing a better potential from now in China whether or not it is cash coming again, valuation of the businesses, exit setting [or] efficiency of the funds.”

Whereas the pickup in investor exercise is much from ranges seen within the final two years, the nascent restoration consists of some investments in client merchandise akin to milk tea and supermarkets, Lai stated.