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Hong Kong’s IPO Market: Resilience and Innovation

Hong Kong’s increasing focus on new-economy and high-tech financing has kept the stock exchange resilient through the coronavirus pandemic. The Hong Kong stock exchange ranked second globally in 2020, with US$51.3bn raised from 154 initial public offerings (IPOs). In 2019, when it was No. 1 for the seventh time in 11 years, it secured 183 company listings and raised US$40.1bn.

Experts forecast that in 2021, more than 10 secondary new listings in Hong Kong will raise more than US$12.8bn. Another four or five listings from new-economy businesses, each raising at least US$1.28bn, are expected to complete. For Hong Kong Exchanges and Clearing (HKEX), which operates the stock market, the pandemic has accelerated planned reforms.

In March 2020, at the beginning of the global pandemic, HKEX launched virtual listing ceremonies. “They offer new issuers the chance to celebrate their momentous achievements, regardless of the constraints of social distancing,” said HKEX. “These were the first of their kind globally.”

HKEX’s pioneering paperless IPO regime will start in July 2021, although some popular IPOs in Hong Kong — including Alibaba Group, NetEase,, Yum China and ZTO Express — were already fully paperless.

Since the introduction of HKEX’s new listing regime in 2018 that allowed pre-revenue biotech companies and new-economy companies with non-standard share structures to raise capital in the city, HKEX has become the go-to international capital market for biotech and new economy companies.

By the end of 2020, 128 new-economy companies, including healthcare and biotech firms, had listed in Hong Kong since the new listing rules took effect, raising a total of US$71.33bn and accounting for 56.8 per cent of IPO funds raised in the city during the period. The new listing regime has helped transform Hong Kong’s capital markets, securing the city’s role as Asia’s tech fundraising hub.

The pandemic and the search for a coronavirus vaccine have also helped accelerate the fundraising momentum for biotech companies and fuel investor appetite in the biotech sector more broadly. A fast-growing ecosystem of biotech companies has bloomed in Hong Kong’s capital markets, making the city Asia’s largest and the world’s second biggest biotech fundraising hub.

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For an innovative biotech company such as Junshi Biosciences, a Hong Kong listing was transformative. “It brought in a lot of international investors to us,” said Dr Ning Li, chief executive of Junshi, a leading biopharma company in China that took the lead in developing neutralising antibodies to fight against Covid-19. “With joint efforts from Eli Lilly and Company and the Institute of Microbiology of the Chinese Academy of Science, the etesevimab antibody combination therapy has been granted emergency use in the United States and elsewhere. It is part of our continuous innovation for disease control and prevention of the global pandemic,” said Dr Li.

Although Junshi boasts a huge talent pool, the access that Hong Kong provided was essential to its strategic vision. “After the listing, we completed more global strategy collaboration deals with multinational pharmaceutical corporations,” Dr Li said, citing a recent US$1.1bn exclusive licence and commercialisation agreement with Coherus BioSciences to develop, manufacture, commercialise, sell and otherwise exploit the monoclonal antibodies including toripalimab in the United States and Canada.

“We believe the Hong Kong listing helps raise our brand exposure and enhance our influence globally,” said Dr Li. In addition, Junshi’s stock price has grown more than 200 per cent since listing — among the highest rises seen in HKEX biotech sector shares.

It is not the only Hong Kong biotech success story. In August 2018, BeiGene became the first dual-listed biotech company on HKEX, with a US$903m IPO.

“For BeiGene, the Hong Kong stock exchange listing helped broaden our shareholder base [and] raise awareness of our company and the biotechnology sector among key stakeholders in Asia,” said Howard Liang, chief financial officer of BeiGene. “We’ve since brought two of our internally discovered products to the market, formed key collaborations with companies including [international biopharmaceutical companies] Amgen and Novartis, built out key manufacturing capabilities and successfully established our leadership in oncology.”

BeiGene was founded in Beijing, but Mr Liang said it had always had global ambitions and that Hong Kong was the perfect springboard. “The capital raised in Hong Kong has enabled BeiGene to build unique and hard-to-replicate expertise, including China-inclusive global clinical development, science-based commercial operation and rapidly expanding manufacturing capabilities in both biologics and small molecules,” he said.

The pandemic has continued to spur innovation that will last long after the coronavirus has been conquered. For Cyberport, Hong Kong’s flagship digital tech hub and incubator, its “Braving the Epidemic” campaign combined the strengths and expertise of the community’s tech start-ups to fight Covid-19.

“Now our focus is shifting from short-term anti-epidemic efforts and adapting to the new normal to actively riding on the accelerated global digital transformation to further augment the economic and social impact of digital tech companies and start-ups,” said Dr George Lam, chairman of Cyberport.

Innovative green solutions

Given that Hong Kong will strive to reach carbon neutrality before 2050, its financial ecosystem requires a greener and more sustainable platform for the future through strengthening climate-related financial risk management, facilitating capital flows towards green and sustainable causes, developing Hong Kong into a green finance centre in the Guangdong-Hong Kong-Macao Greater Bay Area, and strengthening regional and international collaboration.

Hong Kong’s goal of carbon neutrality by 2050 is being driven by a wave of green fintech and the Hong Kong Exchange’s commitment to ESG reporting principles.

Innovative solutions developed by start-ups can act as enablers of a green financial system, Dr Lam believes. “For example, in the green finance sector, one of the core elements is to keep tracking the green performance of the companies or projects that were invested. It might not be a one-off due diligence exercise but an ongoing task to undertake,” he said.

Dr Lam added that the green performance of the investees can be gauged using artificial intelligence and blockchain technology. “It is easier for fund managers to monitor, and the Cyberport incubatee Blockdynamics has developed a system for companies to record their carbon footprint with blockchain,” he said. “Similar technologies can also be applied in other environment-friendly initiatives.”

HKEX also backs a green and sustainable finance community through corporate environmental, social and governance (ESG) performance, reporting and measures. “A wholesale commitment to the sustainable development of our markets will remain priorities for us,” HKEX’s spokesperson said.

In December 2020, HKEX launched STAGE, which is Asia’s first multi-asset sustainable-finance platform connecting issuers, investors and other stakeholders in Hong Kong and beyond. “STAGE will increase sustainable investment data awareness, accessibility and transparency, and draw attention to ESG performance and reporting, as well as sustainable finance products,” HKEX said.