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Hong Kong stock trading volumes jump to four times those of LSE

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Stock trading volumes in Hong Kong have soared to four times those on London’s main exchange, as large technology stocks attracted soaring appetite from foreign investors for the “Nasdaq of Asia”.

Trading volumes in Hong Kong also reached almost 60 per cent of the New York Stock Exchange as investors, mostly from China, poured about $50bn into shares listed in the Asia finance hub this year.

Average daily turnover on the stock exchange in the 30 days to February 16 jumped to about $25bn, according to Financial Times calculations based on Bloomberg data, compared with about $10bn in the same period a year ago.

That is more than quadruple the average daily turnover on the London Stock Exchange during the same period. Earlier this month, London lost its crown as Europe’s biggest share trading centre to Amsterdam. The NYSE’s average daily turnover was $44bn.

Hong Kong this month hosted the bumper $5.4bn listing of Chinese viral video app and TikTok competitor Kuaishou, the world’s biggest tech initial public offering since Uber in 2019.

Line chart of Average stock exchange daily turnover ($bn) showing Hong Kong share trading rises to four times LSE levels

“The exchange is fast becoming seen as the Nasdaq of Asia thanks to continual tech listings that are attracting new capital to Hong Kong,” said Angus Richardson, co-head of pan-Asian execution services at Citigroup.

Including other trading venues, London’s total average daily trading volumes in February were about $9.5bn, according to data from Cboe Europe.

Brokers in Hong Kong said the city’s trading boom this year had been largely driven by an influx of mainland Chinese investors. Many have focused on scooping up stocks listed in Hong Kong, which are valued at a significant discount to those trading in the mainland.

The boost of liquidity from mainland traders could also provide more depth to Hong Kong’s market, a major draw in its battle with bourses in New York to capture a greater share of lucrative Chinese tech IPOs.

The surge in trading volumes in the city has also come despite political upheaval following Beijing’s introduction of a sweeping national security law last year.

“Hong Kong has had a difficult 18 months but the surge in trading shows that investors think this may be settling down and Hong Kong will be on a path to growth,” Richardson said.

Hong Kong’s benchmark Hang Seng index is up almost 13 per cent this year, partly because of optimism surrounding China’s economic recovery from the coronavirus pandemic, compared with less than 5 per cent for Wall Street’s S&P 500 and London’s FTSE 100.

“All the new volume that we’ve seen on the upswing is predominantly southbound investors,” said Andy Maynard, a trader at investment bank China Renaissance in Hong Kong, referring to mainland Chinese buyers.

Chinese investors are able to buy and sell Hong Kong shares through Stock Connect programmes with Shanghai and Shenzhen. Through these link-ups, mainland Chinese investors have purchased a net $49.1bn of Hong Kong-listed equities in the year to date, FT calculations show, compared with about $8bn a year ago.

Line chart of Hang Seng Stock Connect China A-H Premium index showing Chinese onshore  stocks are valued at a premium to those in Hong Kong

Maynard said mainland Chinese investors’ share of daily turnover in Hong Kong had doubled in recent weeks to about 30 per cent.

Brokers and bankers said a flurry of high-profile secondary listings by Chinese tech groups had also injected more liquidity into Hong Kong’s market. The listings have coincided with moves to evict Chinese companies from US exchanges unless they comply with American accounting rules.

“Normally, you would tell clients not to do a secondary listing because [the liquidity] would all flow back to the primary exchange,” said one banker at a large Wall Street investment bank. “But now there are enough Asian investors that don’t want to trade — or can’t trade — in the US, and so are more comfortable in these markets.”



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Darktrace/UK IPOs: shoes for every occasion

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Unpredictable nature of listing process means ‘greenshoes’ will remain required footwear



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Global IPOs begin 2021 at breakneck pace

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Listings on stock markets around the world are running at a record pace, with both deal numbers and values at their highest levels for the start of any year in at least two decades.

This year, 875 initial public offerings each raising at least $1m have been clinched globally, according to data from Dealogic that cover the last 26 years. That figure far outstrips the previous record set in the final months of the dotcom boom in 2000, when 592 companies raised $1m or more in floats over the same time period.

The deluge of listings has lifted IPO proceeds to a record-setting $230bn this year, well above the previous peak of $80bn set in 2000.

The boom stems largely from a spree of flotations of shell companies known as special purpose acquisition companies, or Spacs, which have accounted for almost half of the fundraising haul through IPOs in 2021. Spacs have no underlying business and instead raise capital to pursue a merger with a privately held business.

But the rise in IPOs also reflects enduring demand for global listings in a year when markets have rallied to new highs, with marquee names such as South Korean ecommerce company Coupang and US dating app Bumble making public debuts.

Globally, proceeds from IPOs in 2021 have already surpassed the full-year totals for 21 of the past 26 years.

Column chart of Number of IPOs, by type showing The number of companies going public has ballooned

“The numbers are encouraging because they’re evidence that people have renewed confidence that public markets are a good way to exit their business,” said Carlton Nelson, co-head of corporate broking at Investec. “It shows that they don’t have to tap into private capital despite it being easier and more efficient than it has been for a long time.”

The listings have been heavily tilted to the US, where Spacs had flourished before running into trouble in recent weeks. Roughly two-thirds of the $230bn of capital raised this year has been through listings in the country. China and Hong Kong have trailed in distant second and third places as the preferred choice for new listings, accounting for 8 per cent and 5 per cent of IPO proceeds, respectively.

Column chart of Global initial public offering proceeds ($bn) showing Companies and Spacs have raised $230bn through IPOs in 2021

Among the big debuts already this year have been SoftBank-backed Coupang, which along with selling shareholders raised $4.6bn, and TikTok’s video-sharing rival Kuaishou, which raised $6.2bn in its Hong Kong listing. Food delivery app Deliveroo also made headlines with its London IPO, which raised $2bn for the company and early backers but was ultimately panned by new investors.

Other large listings are already in the queue, including entertainment group Endeavor, Jessica Alba’s consumer goods business Honest Co and stock trading app Robinhood.

The data do not include direct listings, where companies decline to raise capital when they go public, meaning cryptocurrency exchange Coinbase’s blockbuster debut on the Nasdaq earlier this month is not counted in the figures.

Chris Nicholls, who leads Deloitte’s UK IPO and equity advisory team, said he believed the rest of the year looked promising for a spate of new listings.

“As you see economies emerging from lockdown, there should be a period of strong [economic] growth, which bodes well for this wave continuing for a while longer,” he added.

A key question is how much air will come out of the Spac phenomenon, which ballooned in popularity last year but has “slowed meaningfully” in recent weeks, according to strategists with Goldman Sachs.

Bar chart of Cash raised through initial public offerings, by company nationality ($bn) showing Roughly two-thirds of IPO proceeds have been raised in the US

Staff of the Securities and Exchange Commission earlier this month promised closer scrutiny of the revenue and profit projections from companies that use the vehicles to go public, and the number of new Spac listings has plummeted.

Still, the global economic reopening after the coronavirus pandemic is likely to prompt companies to pursue flotations, Investec’s Nelson said.

“IPOs have a long gestation period, it’s not just when the starting gun has been fired,” he added. “It’s really encouraging to see companies of all shapes and sizes starting those conversations now, even if it’s for a few years’ time in the future.”



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Pepco and Poundland chains target multibillion valuation in IPO

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South African conglomerate Steinhoff is set to raise up to 4.6bn zlotys ($1bn) when it lists its Pepco chain of discount retailers in Warsaw this month in the latest in a series of asset sales.

Pepco, which operates about 3,200 stores in countries including Poland, Romania and Hungary, as well as Poundland in the UK, said on Wednesday that shares in the offering would be priced between 38 zlotys and 46 zlotys.

In total, Steinhoff and members of Pepco’s management team will sell 102.7m shares or 17.9 per cent of Pepco to the public, valuing the company at between 21.9bn zlotys and 26.5bn zlotys. The final price will be set on May 14, and trading will begin on May 26.

A portion of shares will also be placed directly with some of Steinhoff’s lenders, following an earlier agreement between the conglomerate and its creditors.

Andy Bond, the former Asda chief executive who now runs Pepco, intends to sell more than 1m shares in the IPO, worth roughly €9.7m at the midpoint of the price range, though he will be subject to a lock-up period until the end of 2023 thereafter.

Bond said the company planned to open a further 8,000 stores “over the longer term”, but would also keep “a clear focus on costs and delivering additional efficiencies as we grow”.

Pepco’s listing is likely to be one of the biggest this year on the Warsaw exchange, which has seen a flurry of activity since Poland’s dominant ecommerce platform Allegro raised 9.2bn zlotys last year in the country’s largest initial public offering

Steinhoff will initially retain a stake of about 82 per cent, but the group is looking to sell assets to reduce debt after an accounting scandal in 2017. 

It has already sold Bensons for Beds, another UK retailer, to private equity group Alteri, and has an option to sell a further 15.4m shares in Pepco in the offering if investors show sufficient interest. Goldman Sachs and JPMorgan are advising on the IPO.

Pepco’s business heartland is in central Europe, but the group is planning to expand elsewhere on the continent, such as Spain, and is targeting earnings before interest, tax, depreciation and amortisation of more than €1bn within the next “five to seven years”.

In the year to the end of September, it reported sales of €3.5bn and underlying ebitda of €229m. Ebitda was almost a third lower than in the previous 12 months, as the pandemic forced stores to close across Europe.

Like many other discount retailers, Pepco does not trade online, as the small size of the purchases typically made by its customers makes the economics of ecommerce difficult.

The group said last week that sales had risen 4.4 per cent in the six months to the end of March, thanks to the opening of more than 200 new stores. However, on a like-for-like basis, sales were down 2.1 per cent.



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