Homegrown SMEs turn to Hong Kong for short-lived IPO rally

However, they failed to sustain the momentum as they trade below offer prices.

Lured by perceptions of higher valuations and liquidity, Singapore-based companies shunned the home bourse and turned to Hong Kong for their share sale aspirations in 2018 with 15 listings on Hong Kong Exchanges and Clearing (including 2 listed by introduction) raising $0.2b in the past year, accounting firm PwC said in a report.

Also read: Singapore is losing its home advantage in IPOs to Hong Kong

These companies were largely SMEs with businesses in the consumer and industrial sector who pinned their hopes on the significantly larger Hong Kong bourse to build their brand and tap on the lucrative Chinese market. 

The pivot to Hong Kong paid off initially as 10 of the 13 listings traded above their IPO offer price during their respective debuts with the remaining 3 trading lower than their IPO offer. 

Also read: Singapore IPOs lag Asian peers as homegrown companies rush to list abroad

This mimics the trend observed in Q1 2018 where three of the five cross-border IPOs in Hong Kong were listings by Singapore-based companies, data from EY show. Together, they were able to raise a combined US$115m in contrast to Singapore who was only able to record one flotation with $0.01b in funding proceeds as of March 14. 

However, the momentum was short-lived after the hype from their debut calmed. Of these 13 Singapore-based companies that listed in Hong Kong in 2018, 8 are trading below their offer price, as of December 15. 

"SMEs considering listing on HKEx should be aware that HKEx is a large exchange with market capitalisation approximating 4 to 8 times of SGX. Liquidity and price sustainability may be a concern post-listing as these SMEs may not obtain as much attention from investors as they would in a comparatively smaller exchange," added PwC. 

Singapore's 2018 IPO performance disappointed after funding proceeds  plunged to $730m compared to the $4.7b recorded in 2017 as capital market activity took a beating from macroeconomic uncertainties.