China’s tech crackdown is cooling HK’s IPO market

New listings in Hong Kong are at the slowest pace since the aftermath of the global financial crisis as weaker markets and China's crackdown on its largest tech companies cooled sentiment.

Only seven companies have gone public in the second quarter so far, on the way to the fewest IPOs since 2009, as Bloomberg data showed.

The subdued activity in the second quarter contrasts sharply with the rush to the stock market that was observed last year or even at the beginning of this year.

Day one performance also struggled: IPOs last month - including warehouse and distribution company JD Logistics Inc (捷 德 國際 物流) and real estate manager Central China Management Co (中原 建業) - delivered the worst average debut performance in 15 months , the data shown.

The slowdown came when China imposed a record fine on Alibaba Group Holding Ltd (阿里巴巴 集團) and ordered 34 of its largest tech companies to correct anti-competitive business practices.

As a result, some companies are reluctant to go public and investors are concerned about further action by regulators.

China has said the steps are to protect consumers and maintain financial stability.

"Investors are no longer paying sky-high ratings for some companies," said Louis Tse (謝明光), Managing Director of Wealthy Securities Ltd (永裕 證?), Based in Hong Kong. "Due to government intervention, some issuers will have to revise their multiples."

China's top 3 tech companies - Tencent Holdings Ltd (騰訊), Alibaba and Meituan (美 團) - are down more than $ 400 billion in value from their highs just four months ago.

The Hong Kong Stock Exchange plunged into a technical correction earlier this year, dragging valuations further.

The benchmark Hang Seng Index has been one of the world's worst performers since a February high.

As a result, the capital raised on the Hong Kong Stock Exchange this year is only half what it was last year, which affects the city's position as a premier fundraising center.

By comparison, the volume of the NASDAQ Composite surpassed last year's total thanks to a boom in blank check listings earlier this year.

Certainly, Hong Kong's IPO volume has more than tripled since the beginning of the year compared to the same period last year, with almost $ 23.9 billion raised.

Meanwhile, the boom in the US Special Purpose Acquisition Company (SPAC) is fizzling out.

Concerns about soaring inflation also make it harder for tech companies to go public, as investors ditch high-valued stocks.

Beijing's scrutiny of businesses, including technology and education, has forced investors to cut their earnings forecasts, investors say.

"We have seen some volatility which is affecting investor appetites, but reasonably priced deals are being closed," said Francesco Lavatelli, Head of Equity Capital Markets, Asia Pacific, JPMorgan Chase & Co.

Financial technology company Bairong Inc (百 融) slumped 16 percent when it started trading in late March, while healthcare company Zhaoke Ophthalmology Ltd (兆 科 眼科) slumped 15 percent in late April.

JD Logistics, which raised $ 3.2 billion, closed just 3 percent above its asking price on its debut, unlike another entity from JD.com (京東), JD Health International Inc (京東 健康), which opened on first day rose 56 percent last year.

The test of whether Hong Kong's IPO market can see a revival is said to be some upcoming public listings, including share sales by China Youran Dairy Group Ltd (中國 優 然 牧業 集團) and Angelalign Technology Inc (時代 天使), China's leading invisible orthodontic manufacturer.

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