There is likely to be a rash of new technology sector initial public offerings (IPOs) over the next 12 to 18 months, especially by companies already backed by China’s technology giants Alibaba and Tencent, following the strong equity market performance this year.
Research firm CB Insights says that out of the 46 “unicorns” in China, 21 are backed by China’s Big Four internet giants, Alibaba, Baidu, JD.com, and Tencent or their affiliates, such as Ant Financial.
A unicorn is a start-up firm valued at more than US$1 billion.
And it adds that China’s tech leaders are still pouring money into venture-capital-backed firms right across Asia.
Tencent Holdings, for instance, made over 30 investments in venture-capital-backed tech firms in the region between the first quarter of 2016 and the first quarter of this year.
While there are few signs yet that Alibaba or Tencent are in any rush to cash in their investments, buoyant market conditions are driving mainland firms, including those operating in the technology sector, back to the markets for more capital.
E Zhihuan, chief economist at Bank of China Hong Kong (BOCHK) said the signs are good that tech IPOs will pick up strongly.
“The stock market sentiment is relatively upbeat, supported by a low interest rate environment and recent inclusion of A shares in MSCI’s key emerging markets index,” E said, adding that the slowing of regulatory approval for IPOs in mainland China is also a driver.
Hong Kong’s stock market benchmark, the Hang Seng Index, is up 18 per cent in the year so far while the MSCI International World Index has gained 10 per cent.
BOCHK estimates total funds raised by IPOs in Hong Kong could reach HK$190 billion this year, compared with HK$194.8 billion last year.
Likely to come to market in coming months are a number of tech IPOs, which are already backed by Alibaba or Tencent:
Source: South China Morning Post