An IPO is an Initial Public Offering. In other words, it is the first time a company sells shares to the public. This event marks a significant milestone for any company, signalling success and growth. Traders and investors are always looking for the subsequent big IPO to get in on the ground floor of a potentially profitable investment.
The Hong Kong stock market is profitable globally, and there are always several IPOs that you can invest in. Hong Kong saw its first SPAC (Special Purpose Acquisition Company) IPO in early 2021, and there are sure to be more in the next year or two. Here are five of the most anticipated IPOs in Hong Kong for 2022.
FWD Group Holdings
FWD Group Holdings is the holding company for FWD Insurance, a lifestyle insurance brand. The company was founded in 2013 and is headquartered in Hong Kong. FWD Group Holdings plans to list on the Hong Kong Stock Exchange in the first quarter of 2022.
China Tourism Group
China Tourism Group is a state-owned enterprise responsible for managing tourism in China. The company was founded in 1999, and it is headquartered in Beijing. China Tourism Group went ahead and became Hong Kong’s biggest IPO in 2021 and has a secondary listing on the Hong Kong Stock Exchange planned for 2022.
Leapmotor
Leapmotor is a Chinese electric vehicle company. The company was founded in 2015, and it is headquartered in Wuhan. Leapmotor is working on a US$1 million IPO in Hong Kong thatkicked off in late March.
Lalamove
Lalamove is a Hong Kong-based logistics and delivery company. The company was founded in 2013, and it is headquartered in Kowloon. Lalamove plans to move its IPO from the US to Hong Kong in 2022 and has gotten the ball rolling for a $1 billion IPO since August of 2021.
Little Red Book
Little Red Book is a social e-commerce platform in China. The company was founded in 2013, and it is headquartered in Shanghai. They are contemplating moving their IPO from the US to Hong Kong and aim to raise US$500 million.
Benefits of investing in IPOs in Hong Kong
There is a high demand for shares
The Hong Kong stock market is active and liquid, meaning there is always a high demand for shares, and prices are less volatile than in other markets.
A welcoming regulatory environment
Hong Kong has a very welcoming regulatory environment for IPOs. The listing process is relatively straightforward, and there are few restrictions on foreign companies listing on the exchange.
Large growth potential
Hong Kong is an international financial centre involving many potential investors. It increases the chances of a successful IPO and results in a higher valuation for the company.
Supportive ecosystem
Hong Kong has a supportive ecosystem for startups and small businesses. Several incubators, accelerators, co-working spaces, and venture capital firms make it an ideal location to list an IPO.
Gateway to mainland China
Finally, Hong Kong is often referred to as the gateway to mainland China because it is the preferred location for foreign companies to list their shares on the Hong Kong Stock Exchange, and it gives them access to the Chinese market, the world’s largest.
Risks of IPO investing
Rigid requirements
The listing requirements in Hong Kong are pretty rigid, meaning that companies must meet many strict criteria to list on the exchange.
Limited pool of potential investors
The pool of potential investors in Hong Kong is relatively small compared to other international financial centres, and it can limit the valuation of a company at IPO.
High valuations
Companies often receive high valuations at IPO, resulting in a higher risk of investors’ share price volatility and losses.
Lack of liquidity
The shares of many companies listed on the Hong Kong Stock Exchange are not very liquid, meaning it may be challenging to sell your shares when you want to.
Political risk
Hong Kong is generally politically stable and has been for decades, but there is always the risk of instability as demonstrated in recent years, resulting in a decrease in the value of the shares listed on the exchange.
The bottom line
Investing in IPOs can be an excellent way to invest in companies with high growth potential. However, there are also several risks that you should be aware of before investing. Do your research and consult a financial advisor or an equity research company that offers quantamental investing strategy to ensure an IPO is suitable for you.
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