When it comes to returns, Hong Kong’s IPO market is living it up

It’s a good time to be an IPO investor in Hong Kong.

Buoyed by growing risk appetite, the city’s initial public offerings are delivering the best returns in years. Companies that raised at least USD100 million jumped an average 15 percent in their first month of trading, weighted by deal size, according to data compiled by Bloomberg. That’s the most since 2011 for this time of the year and would be the biggest jump since 2007 should this pace last through December.

“Investors are now in a more risk-on mode on the back of the recent market rally,” said Christopher Wong, head of Asia Pacific’s equity capital markets at BNP Paribas SA. “More prudent IPO pricing has also been a major contributing factor after poor IPO performances last year left investors with a bad taste.”

The city’s benchmark Hang Seng Index has rallied 16 percent in 2019 for its strongest beginning since 1993. A dovish shift in central-bank policy globally and optimism over the U.S.-China trade talks have pushed the gauge up 22 percent from a low in October and into a bull market.

While Asian IPOs overall had a weak start to the year, Hong Kong has been holding up. There have been 12 offerings above $100 million raising a total of $2.2 billion in 2019, compared with four deals for $2.1 billion in the same period last year. The city’s best-performing new stocks since January, CStone Pharmaceuticals and China Kepei Education Group Ltd., jumped 31 percent and 27 percent in their first month, respectively.

Back in 2007, when 12 companies had already raised a combined $3.1 billion by this time of the year, deals above $100 million rewarded investors with an average 37 percent one-month return, data compiled by Bloomberg show. That’s as the Hang Seng Index surged 39 percent in one of the biggest bull markets in the city’s history. Fox Hu & Natalie Lung, Bloomberg