AI frenzy powers Hong Kong fundraising record

Bankers in Hong Kong skipped the summer break as an artificial intelligence (AI)-fueled rush for capital sent share sales to a record, defying a bruising selloff in the city’s stocks.

Initial public offerings (IPOs), placements and block trades raised US$47.5 billion in July to last month, the biggest haul ever for the period, data compiled by Bloomberg showed. That pushed fundraising this year above US$92 billion and within reach of the US$112.5 billion record set in 2021.

AI has been at the heart of Hong Kong’s deal revival, but this summer brought a new level of intensity. Chinese companies raised ever-larger sums and returned to the market more quickly as they sought to fund expansion in the fast-growing industry.

Photo: Bloomberg

Alibaba Group Holding Ltd’s (阿里巴巴) US$10.2 billion follow-on offering was the biggest transaction during the period, while Zhongji Innolight Co (中際旭創) raised almost US$8 billion in Hong Kong’s largest listing in nearly seven years. Others tapped investors repeatedly: AI model maker Z.AI Co (智譜) has raised US$9.6 billion this year through its IPO, placements and convertible bonds.

“People raise capital right out of lockup and tend to do so more frequently,” said James Wang (王亞軍), head of Asia ex-Japan equity capital markets at Goldman Sachs Group Inc.

“Before, they did it once and it would be quiet for one to two years. Now they do it and three months later they come back. This will continue for a couple of years because of AI. I don’t see that pace slowing down,” he said.

Aside from Z.AI, rival model maker MiniMax Group Inc (稀宇科技), as well as chipmakers Shanghai Iluvatar CoreX Semiconductor Co (天數智芯) and Shanghai Biren Technology Co (壁仞科技) all returned to the market during that feverish July, soon after their IPO lockups expired.

Hong Kong Financial Secretary Paul Chan (陳茂波) in a blog post yesterday said that there was increased participation from the Middle East, with several funds from that region planning to invest more in Hong Kong.

The boom extended across the Asia-Pacific, where share sales topped US$120 billion in the third quarter, the most for the period in six years. Mainland China produced some of the region’s biggest deals, including memory chipmaker CXMT Corp’s (長鑫存儲) 66.6 billion yuan (US$9.9 billion) IPO — the country’s second-biggest ever.

The fundraising boom has unfolded against a much shakier market backdrop. The MSCI Asia-Pacific Index slumped as much as 7 percent in July, while Hong Kong’s Hang Seng Tech Index has been on a downward trend this year.

Weak deal performance is testing investor appetite. Of the 10 largest deals in Hong Kong since the start of July, just two are trading above water, while expectations for further US Federal Reserve rate hikes are tightening financial conditions globally.

“If you look at overall sentiment, having large transactions trading through the offer price is not helpful for risk appetite,” said Martin Zoll, global head of equity capital markets and global co-head of strategic equity and financing at HSBC Holdings PLC. “So as we go into year-end, I would expect that investors potentially become more selective about where they put their money to work.”