Hong Kong’s sluggish IPO market isn’t likely to recover until at least the second half of this year, even as investment flows to China show signs of rebounding, according to HSBC Holdings Plc’s top investment banker.
“I don’t see evidence of it picking up yet,” said Greg Guyett, chief executive officer for global banking and markets at the London-based lender. He said the primary markets won’t get going “until the volume of secondary flow and interest is stronger.”
Initial public offerings have been depressed in Hong Kong, with proceeds slumping to the lowest in more than two decades last year. The listing market was dealt another blow last week when Alibaba Group Holding Ltd. called off a US$1 billion ($1.35 billion) sale of shares in Cainiao Smart Logistics Network Ltd.
The money raised from IPOs fell another 29% in the first quarter to about US$605 million, the worst three-month period since the global financial crisis, Bloomberg-compiled data show. The city hasn’t had a new offering bigger than US$1 billion since CALB Group Co.’s debut in October 2022.
Guyett, who will be in Hong Kong for HSBC’s inaugural Global Investment Summit that kicks off Monday, sees growing evidence of foreign investor interest in China as the nation finds a “bottom” for its economy.
“We’ve started to see some fund managers reallocating assets,” and others saying it’s time to get “more serious” about China, he said in an interview from London.
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Foreign direct investment in China recovered in January after slumping to a 30-year low in 2023. In other signs of green shoots, the purchasing managers index registered the highest reading in 12 months, and the CSI 300 stock index capped its first quarterly gain in a year.
While many global banks have been cutting staff, HSBC isn’t reducing investments in its people in Hong Kong and China as it wants “to be in position” for a recovery, according to Guyett.
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The bank’s overall headcount for global banking and markets will probably “continue to trend down” as the firm leverages technology to streamline operations, said Guyett.
“As we get more efficient and effective, we’ll be fewer and fewer people in the middle and back office areas,” he said. “In terms of the front office, however, we’ll continue to grow.”
Guyett said he has no concerns about a new security law passed last month in Hong Kong that has prompted fresh warnings from the US, Europe and the UK that it could muzzle open discussion. Hong Kong has the ingredients to remain an important financial centre, he said.
“I continue to hear from our clients a great deal of confidence in both the need to be in Hong Kong, given the proximity to China, but also their comfort in doing business in Hong Kong,” he said.
Guyett, who is based in London, was supposed to move to Hong Kong in 2021. Those plans changed after his role was expanded to include the markets division when Georges Elhedery became chief financial officer in 2022. Guyett works from Hong Kong roughly one week in five.
In other parts of Asia, HSBC has been expanding sales and trading in Singapore, while hiring bankers in India, which Guyett said has reached an “inflexion point” to become an interesting market.
“We’ve been adding people in Singapore and in Mumbai primarily because we see long-term opportunities,” he said.
Guyett expects about 2,500 institutional investors and 300 companies to attend the investment summit in Hong Kong. The bank is pivoting off the Cathay/HSBC Hong Kong Sevens rugby tournament from April 5 to 7, taking a conference slot traditionally held by Credit Suisse.
