China’s technology list drops sharply when Beijing breaks up the sector

The value of stock market listings by Chinese technology companies fell more than 60 percent in the second quarter, as Beijing regulators widened their grip on the sector.

Since the beginning of April, the first public offerings by China’s technology groups on worldwide exchanges have raised only $ 6 billion, up nearly two-thirds from the first quarter, according to Dealogic data.

The share of the technology listing in proportion of all Chinese IPOs also fell to the lowest level in two years, to only 21 percent of the more than $ 28 billion collected during the period.

The decline comes as Chinese technology groups have faced pressure from Beijing, which in recent months has intensified regulatory control of some of the biggest names in the sector.

Regulators blocked the $ 37 billion IPO of Ant Group, the billionaire-controlled fintech group Jack Ma, November, and have ordered the company to restructure. Authorities have also punished technology groups for what they believe to be monopolistic practices, including a fine on Ant Alibaba’s sister’s trade group. recorded $ 2.8 billion.

“The regulatory issue in China is something that is more fundamental because it has to do with the assessment that you can give to your business – this is particularly true for financial technology companies,” said Frank Benzimra, head of strategy for China. equity in Asia in Société Générale. “Certainly this matters a lot to companies looking for an IPO.”

U strong fall of technological IPOs in the second quarter contrasted with a first-quarter quarter, in which such groups raised more than $ 15.3 billion from stock sales in Shanghai, Shenzhen, Hong Kong and New York.

It also came despite a boom for the Chinese IPO more broadly, with primary and secondary listings worldwide raising a record $ 65.4 billion in the first six months of the year, Dealogic data show. .

Much of the drop he came to Hong Kong. The city’s exchange has not welcomed a single technology listing from mainland China in the past three months, after hitting $ 8.6 billion in IPOs in the first quarter.

Louis Tse, general manager of Hong Kong brokerage Wealthy Securities, said the fall was due to both a global shift by investors away from high-growth stocks and a fall in Chinese companies. looking for secondary ads in the city.

Over the past year, Chinese Internet groups trading in the United States include JD.com, NetEase and Baidu has raised billions of dollars in Hong Kong as concerns grew that could be raised in New York. The United States passed a law in December that enforced it eliminates businesses which do not respect American control rules.

“It’s dead because … after so many waves of applications to be listed in Hong Kong there aren’t that many companies left,” Tse said.

However, the Chinese technology IPO could be set for a return. Chinese electric vehicle manufacturer Xpeng said Friday it will seek to raise up to $ 2.3 billion in a Hong Kong listing with trading to begin next month. Ride-Hiling Group Didi Chuxing plans to raise $ 4 billion in a potential listing on the NYSE list in the coming weeks.

Jason Elder, a colleague at law firm Mayer Brown, said the absence of Chinese tech listings in Hong Kong in the second quarter was “unusual and anomalous” but added that there was no way that the pace of list at the beginning of the year could continue forever.

“I don’t think it’s a market announcement that loses its appeal or that isn’t open to technology – I see this as a time issue,” he said.

Unhedged – Markets, finance is strong opinion

Robert Armstrong discusses the most important market trends and discusses how Wall Street’s best minds respond to them. Sign up here to get the newsletter sent directly to your inbox every day of the week