Sullen Hong Kong negotiators hope China’s Congress will revive economy and IPOs

By Scott Murdoch

HONG KONG, October 13 (Reuters)Hong Kong negotiators expect China’s 20th Party Congress next week to signal a shift in focus in Beijing towards trade and economic issues that could help revive the city’s IPO issuance from its lowest level in nine years.

Continued COVID-19 lockdowns have been blamed for dramatically slowing China’s economic growth, cutting it off from the rest of the world and reducing investors’ appetite to buy Chinese assets.

Any shift toward opening China’s borders and boosting demand there would bolster confidence and business transactions, lawyers and analysts said. Hong Kong only recently began its own reopening, easing its virus-fighting policies that have tarnished its credentials as a global financial hub.

“I hope the global economic situation will improve next year and I expect to see greater focus on trade and economic issues in China after the 20th Party Congress,” said Richard Wang, partner of Freshfields in Hong Kong, adding that this should lead to more business. are looking to raise capital.

Initial public offering (IPO) activity in Hong Kong, which has traditionally been dominated by mainland companies, has fallen to its lowest level in nine years amid falling Chinese markets, escalating Sino tensions -Americans and a tightening of the regulatory environment in China.

International listing ambitions have been frozen since China announced new rules, which have yet to be finalized, for companies wishing to sell shares outside mainland markets.

There have been just $9.28 billion in Hong Kong IPOs this year, down from $37.1 billion in the same period of 2021, according to Refinitiv figures. The value of new share sales is the lowest since 2013.

Additionally, more than 80% of Hong Kong IPOs this year have traded underwater since their debut, according to Dealogic data.

IPOs in mainland China raised $54.12 billion, down 33% from $80.89 billion in the first three quarters of 2022, according to Refinitiv data. However, the Shanghai STAR and the Shenzhen Stock Exchange are the two most active IPO markets in the world, according to the data.

“People expect things to open up after the meeting, but in terms of timing, when you see that, it won’t be an overnight change,” said firm partner Stephanie Tang. lawyers Hogan Lovells.

“How this will evolve, there is no determining factor, but the reasonable expectation is that we will see transaction activity progress from late 2022 to spring 2023.”

However, most economists doubt that Chinese policymakers will soon offer concrete signals of a relaxation of the zero-COVID policy or a roadmap for reopening borders.

COVID infections are at highest level since August and there are about 36 cities under lockdown or some form of control ahead of the meeting starting Sunday.

Greater political certainty in areas such as technology and education may only become clear after the two annual sessions of China’s parliament in March, lawyers have said.

(Reporting by Scott Murdoch; Editing by Anshuman Daga)

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