Initial public offerings, secondary share sales and equity-linked transactions are all poised for a boom period
[HONG KONG] Hong Kong bankers have ended the summer lull with a bang, closing billions of US dollars of capital market deals as China’s corporate giants rush to raise cash.
So frenetic is the pace that three Hong Kong-listed companies sought to raise US$6.2 billion within just 12 hours last week. Alibaba Group Holding issued US$3.2 billion in a blockbuster sale of convertible bonds, a type of debt that can turn into stock. China Pacific Insurance (Group) raised US$2 billion from its own convertible notes. Electric-vehicle maker Nio nabbed US$1 billion through a share sale.
Bankers say there is plenty more to come. After a brief slowdown during the summer months, equity capital markets insiders are bracing themselves for a raft of billion-dollar deals. Initial public offerings (IPOs), secondary share sales and equity-linked transactions are all poised for a boom period.
“It’s been a pretty hectic couple of weeks, and I suspect that it’s only going to continue,” said John Huang, head of equity capital markets for Asia at HSBC Holdings.
The latest supply will add to what has already been a blistering pace of dealmaking in the city this year. Hong Kong share sales, including IPOs, placements and block trades, have raised US$51 billion since Jan 1, putting them on track to close the year at a four-year high, according to data compiled by Bloomberg. Sales of bonds that can be exchanged for stock by Chinese companies have raised more than US$33 billion globally so far in 2025, eclipsing annual proceeds in each of the past two years.
The pace of issuance still is not enough to meet demand. Fund managers, finally enjoying a period of optimism for Hong Kong’s long beleaguered stock market, are rushing to place orders for share sales and convertible bonds. The scale of demand means many investors are left disappointed once these deals are allocated.
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“Some of these high-quality deals, no matter how big the size, we get peanuts,” said Victoria Mio, a portfolio manager at Janus Henderson Investors who oversees Chinese equities, adding that her fund has been participating in more deals this year.
Convertible bonds
Chinese companies are leading the charge, and are likely to push Asia’s equity-linked bond issuance to multi-year highs as they raise cash for overseas expansion or bets on artificial intelligence. These bonds can offer much cheaper funding than traditional debt, Alibaba and China Pacific’s recent convertible notes came with zero coupons, and they also benefit when stocks are moving quickly.
Hong Kong’s benchmark Hang Seng Index is up more than 30 per cent this year, despite a plunge in April that wiped out most of its earlier gains. Chinese tech stocks have been even more volatile: Alibaba’s shares jumped 15 per cent last week alone, while shares of battery giant Contemporary Amperex Technology Co Limited (CATL) soared as much as 10 per cent on Monday (Sep 15) after being upgraded by JPMorgan Chase.
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Continued volatility “has urged more issuers to accelerate their capital-expenditure plans to ensure they take some money off the table while the market remains very supportive”, said Brian Chau, co-head of Asia equity-linked deals at UBS Group.
Investor appetite for these deals was clear when Alibaba and China Pacific came to the market. Both deals were subscribed multiple times despite having excluded sales to certain US onshore investors under their so-called Regulation S format, according to sources familiar with the matter.
The arrangement, which exempts some US regulatory filing obligations and so makes execution faster, was also used by CATL for its US$5.2 billion listing this year.
More companies are looking to tap the equity-linked market for the first time as their peers have raised funds that way, said Rob Chan, Citigroup’s head of Asia equity capital markets syndicate. That is encouraging more executives to grasp the technicalities of a convertible-bond deal, which typically involves a hedging mechanism, Chan added.
Still, there are some hurdles for equity-linked supply. The US Federal Reserve is widely expected to cut interest rates on Wednesday, and recent data has fuelled bets on several more cuts to follow. Lower interest rates make conventional debt cheaper for companies, eroding the appeal of convertible bonds.
“If long-term rates come down quicker than expected, then some potential issuers may consider straight bonds more seriously,” said Akshay Sawhney, co-head of Asia-Pacific equity capital markets at Bank of America.
First timers
But bankers are not just relying on convertible bonds. While big first-time share sales in Hong Kong so far this year have mostly come from companies whose stock already trades in mainland China, the pipeline is building for Chinese companies looking to go public for the first time.
Leading the pack is the gold business of Zijin Mining Group, which this week began gauging investor interest for a Hong Kong IPO that could fetch more than US$3 billion, while automaker Chery Automobile’s IPO may raise about US$1.5 billion.
These deals will be buttressed by more listings from companies already trading in China, providing they get approval from the onshore regulator. Hong Kong listing proceeds could more than double to a four-year high of US$26 billion, according to Bloomberg Intelligence, which raised its estimates this month.
There has also been a flurry of funding in the conventional bond market. Chinese technology and mobile gaming giant Tencent Holdings has named banks for its first such offering in four years, with a plan to sell offshore yuan bonds. That followed a recent 4.4 billion yuan (S$791 million) deal from Baidu, another tech giant. BLOOMBERG
