Protests shake Hong Kong’s IPO market, but all is not lost

The Initial Public Offering market in Hong Kong has taken a hit following a series of protests in the Asian city, plunging about 43% in proceeds this year alone. However, analysts believe that this could change.

According to financial data company Refinitiv, Hong Kong has experienced a slowdown in IPO activities for the better part of this year. The city’s IPO market has raised $18.5 billion as at this day, circa 42.8% down from last’s record.

The months-long protests occasioned by a now-withdrawn extradition bill caused a lot of panic among companies and investors, as billions of investments exited the market, according to a report by Reuters. The protests that began in June have also seen Hong Kong’s benchmark index, Hang Seng tumble.

Amid the turmoil, The Wall Street Journal reported that Saudi’s oil giant Aramco had decided to shift its IPO internal destination from Hong Kong or London to Tokyo. Reuters also reported e-commerce giant Alibaba had postponed its projected $15 billion listing in the Hong Kong market.

“Investor sentiment in Hong Kong is quite low as demonstrations continue as they have become smaller but more violent,” said Brendan Ahern, chief investment officer of Krane Shares, an investment firm known for its China-focused ETFs.

“The demonstrations have had a material negative effect on the local economy as tourists avoid the city which hurts hotels, restaurants, and retailers. IPOs tend to ride investor enthusiasm which is lacking in Hong Kong today,” he added.

Nonetheless, all is not lost. “A robust IPO pipeline is anticipated to reverse the listing drought witnessed in the last two months and continue to show Hong Kong’s resilience as one of the best venues for initial public offerings,” said Refinitiv’s Tan in an email to CNBC.

Tan also mentioned ESR Cayman’s up to $1.45 billion IPO, the second-largest listing in Hong Kong after Budweiser’s $5 billion. ESR Cayman is set to start trading on November 1.

Other notable listings expected in Hong Kong include financial institution Home Credit’s up to $1.5 billion IPO and Bank of Guizhou’s up to $1 billion listings.

If the US were to go ahead and place curbs on investments in China, Hong Kong would be the biggest beneficiary, considering the ongoing trade fight between Beijing and Washington. The Trump administration was reportedly considering delisting all of the Chinese stocks although they pushed back saying they were “not considering” such measures at this time.