December 23, 2015 / 8:05 AM / 3 years ago

HK pips New York as world's biggest IPO capital, 2016 outlook strong

A passerby is reflected on a panel displaying Asian market indexes at the Hong Kong Stocks Exchange in Hong Kong, China August 24, 2015. REUTERS/Bobby Yip

HONG KONG (Reuters) - Hong Kong replaced New York this year as the world’s biggest IPO market by the amount of funds raised, buoyed by Chinese banks and other financial firms, with the deal pipeline pointing to a stronger year ahead.

Companies raised $25 billion via initial public offerings (IPOs) in Hong Kong so far this year, higher than the $19.4 billion raised in New York, preliminary data from Thomson Reuters data shows.

Many Chinese brokers and banks had rushed to raise funds to finance their margin loan business and boost core capital amid a stock market rally earlier this year. Big Hong Kong IPOs in 2015 included the $4.8 billion deal by Guotai Junan Securities Co Ltd and a $2.5 billion capital raising by China Huarong Asset Management Co Ltd.

For New York, which was the world’s biggest IPO market for the past three years, IPO proceeds slumped 73 percent this year after surging to $71.7 billion in 2014, helped in part by Alibaba Group Holding Ltd’s record $25 billion deal.

The funds raised in Hong Kong accounted for more than a third of the total amount for the entire Asia Pacific region, but were 13 percent lower than a year ago, according to the data.

Overall, investment banks in Asia earned an estimated $5.74 billion in fees from equity capital markets deals in 2015, with IPOs making up 36 percent of the total, the data shows, a larger share than the 20 percent of bank revenue in the United States.

Next year, more Chinese companies are set to raise funds through IPOs, the financial sector leading the pack, bankers said.

Companies expected to issue IPOs next year include state-backed Postal Savings Bank of China, which recently completed a $7 billion pre-IPO financing round, Chinese online lending platform Lufax, backed by China’s second largest insurer Ping An Insurance Group Co Ltd and Sinopec Sales, the marketing arm of China Petroleum and Chemicals Corp (Sinopec). “The financial services sector will still be one of the key drivers, because the size of those deals are much larger than in consumer and manufacturing,” said Louis Lau, partner at the Capital Markets Advisory Group at KPMG China.

Reporting by Denny Thomas and Elzio Barreto; Editing by Miral Fahmy

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