Finance

Chinese IPOs in the U.S., Hong Kong to rise next year, analysts say

Published

7 months ago

October 28, 2024

Business Finance News

Chinese autonomous driving company WeRide listed on the Nasdaq on Friday, Oct. 25, 2024.

China News Service | China News Service | Getty Images

BEIJING — Chinese IPOs in the U.S. and Hong Kong are set to increase next year, analysts said, as some high-profile listings outside the mainland this year raise investor optimism over profitable exits.

Chinese autonomous driving company WeRide listed on the Nasdaq Friday with shares rising nearly 6.8%. Earlier this month, Chinese robotaxi operator Pony.ai also filed paperwork to list on the Nasdaq. Both companies have long aimed to go public.

Few large China-based companies have listed in New York since the Didi IPO in the summer of 2021 increased scrutiny by U.S. and Chinese regulators on such listings. The Chinese ride-hailing company was forced to temporarily suspend new user registrations, and got delisted in less than a year.

U.S. and Chinese authorities have since clarified the process for a China-based company to go public in New York. But geopolitics and market changes have substantially reduced U.S. IPOs of Chinese businesses.

“After a couple of slow years, we generally expect the IPO market to revive in 2025, bolstered by interest rate decreases and (to some extent) the conclusion of the U.S. presidential election,” Marcia Ellis, Hong Kong-based global co-chair of private equity practice, Morrison Foerster, said in an email.

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“While there is a market perception of regulatory issues between the U.S. and China as being problematic, many of the issues driving this perception have been solved,” she said.

“Chinese companies are becoming increasingly interested in getting listed in Hong Kong or New York, due to difficulty in getting listed in Mainland China and pressure from shareholders to quickly achieve an exit.”

This year, as many as 42 companies have gone public on the Hong Kong Stock Exchange, and there were 96 IPO applications pending listing or under processing as of Sept. 30, according to the exchange’s website.

Last week, Horizon Robotics — a Chinese artificial intelligence and auto chip developer — and state-owned bottled water company CR Beverage went public in Hong Kong.

The two were the exchange’s largest IPOs of the year, excluding listings of companies that also trade in the mainland, according to Renaissance Capital, which tracks global IPOs. The firm noted that Chinese delivery giant SF Express is planning for a Hong Kong IPO next month, while Chinese automaker Chery aims for one next year.

Still, the overall pace of Hong Kong IPOs this year is slightly slower than expected, George Chan, global IPO leader at EY, told CNBC in an interview earlier this month.

He said the fourth quarter is generally not a good period for listings and expects most companies to wait until at least February. In his conversations with early stage investors, “they are very optimistic about next year” and are preparing companies for IPOs, Chan said.

The planned listings are generally life sciences, tech or consumer companies, he said.

Hong Kong, then New York

Investor sentiment on Chinese stocks has improved over the last few weeks thanks to high-level stimulus announcements. Lower interest rates also make stocks more attractive than bonds. The Hang Seng Index has surged over 20% so far this year after four straight years of declines.

Many Chinese companies that list in Hong Kong also see it as a way to test investors’ appetite for an IPO in another country, said Reuben Lai, vice president, private capital, Greater China at Preqin.

“Geopolitical tensions make Hong Kong a preferred market,” Ellis said, “but the depth and breadth of US capital markets still make many companies seriously consider New York, especially for those that focus on advanced technology and are not yet profitable, who sometimes believe that their equity stories will be better received by U.S. investors.”

Just over half of IPOs on U.S. exchanges since 2023 have come from foreign-based companies, a 20-year high, according to EY.

Geely-backed Chinese electric car company Zeekr and Chinese-owned Amer Sports both listed in the U.S. earlier this year, according to EY’s list of major cross-border IPOs.

Chinese electric truck manufacturer Windrose said it intends to list in the U.S. in the first half of 2025, with a dual listing in Europe later that year. The company, which aims to deliver 10,000 trucks by 2027, on Sunday announced it moved its global headquarters to Belgium.

A recovery in Chinese IPOs in the U.S. and Hong Kong can help funds cash out on their early stage investments in startups. The lack of IPOs had reduced the incentive for funds to back startups.

Now, investors are looking at China again, after recently deploying capital to India and the Middle East, Preqin’s Lai said. “I’m definitely seeing a greater potential from now in China whether it’s money coming back, valuation of the companies, exit environment [or] performance of the funds.”

While the pickup in investor activity is far from levels seen in the last two years, the nascent recovery includes some investments in consumer products such as milk tea and supermarkets, Lai said.

Finance

Stocks making the biggest moves midday: WOOF, TSLA, CRCL, LULU

Published

2 days ago

June 6, 2025

Business Finance News

Finance

Swiss government proposes tough new capital rules in major blow to UBS

Published

2 days ago

June 6, 2025

Business Finance News

A sign in German that reads “part of the UBS group” in Basel on May 5, 2025.

Fabrice Coffrini | AFP | Getty Images

The Swiss government on Friday proposed strict new capital rules that would require banking giant UBS to hold an additional $26 billion in core capital, following its 2023 takeover of stricken rival Credit Suisse.

The measures would also mean that UBS will need to fully capitalize its foreign units and carry out fewer share buybacks.

“The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion,” the government said in a Friday statement, referring to UBS’ holding of Additional Tier 1 (AT1) bonds.

The Swiss National Bank said it supported the measures from the government as they will “significantly strengthen” UBS’ resilience.

“As well as reducing the likelihood of a large systemically important bank such as UBS getting into financial distress, this measure also increases a bank’s room for manoeuvre to stabilise itself in a crisis through its own efforts. This makes it less likely that UBS has to be bailed out by the government in the event of a crisis,” SNB said in a Friday statement.

‘Too big to fail’

UBS has been battling the specter of tighter capital rules since acquiring the country’s second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse.

The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention.

Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank’s balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not “too big to fail” and that the additional capital requirements — set to drain its cash liquidity — will impact the bank’s competitiveness.

At the heart of the standoff are pressing concerns over UBS’ ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank.

Higher capital requirements can whittle down a bank’s balance sheet and credit supply by bolstering a lender’s funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments.

“While winding down Credit Suisse’s legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands,” Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement.

“Such measures may place UBS’s capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated.”