Omicron cases surge, leading to a decline in IPO deals in China and Hong Kong.

• Although IPO activity in Hong Kong was slower compared to mainland China, Greater China overall experienced a 28% decline in the number of initial public offerings, according to EY's data.
• Notably slower IPO activity was observed in Hong Kong due to recent market volatility, a severe outbreak of Omicron cases, and a relatively bigger fall in the local stock market indices, according to EY's report.
• In the first quarter compared to a year ago, the decline in Asia-Pacific IPOs was less severe than the global decline, with a fall of 37% in the region, or 321 listings.

Despite a significant decline in public listings in greater China during the first quarter, this region outperformed other global markets, according to EY's data.

Although IPO activity in Hong Kong was slower compared to mainland China, Greater China overall experienced a 28% decline in the number of initial public offerings.

Notably slower IPO activity was observed in Hong Kong due to recent market volatility, a severe outbreak of Omicron cases, and a relatively bigger fall in the local stock market indices, according to EY's report.

A year ago, Hong Kong had 34 IPO deals, but now it has only 12, which is a decrease of more than 60%.

Over the past year, Chinese tech shares have experienced a significant decline due to regulatory crackdown and escalating tensions with the U.S. Specifically, the Hang Seng Tech index has dropped approximately 44% compared to the previous year, while the benchmark has fallen roughly 22% in the same time frame.

Despite a slight decrease in deal numbers in Mainland China, the proceeds increased year-on-year due to hosting three of the seven mega IPOs in Q1 2022, the firm stated.

Despite a decline in the number of IPOs, the overall greater China listings generated a slight increase in proceeds, amounting to $30.1 billion, which represents a 2% rise compared to the previous year.

In China and Hong Kong, the decline in IPO activity mirrored the trend in the rest of Asia-Pacific, where IPOs fell, but not as sharply, at 16% year-on-year. However, IPO proceeds in the region increased by 18%.

‘Sudden reversal’ from record highs last year

While Asia-Pacific IPOs experienced a decline of 37% in the first quarter compared to the previous year, with 321 listings, global IPOs saw a more severe drop of 51% in proceeds raised, amounting to $54.4 billion from January to March this year.

The number of IPOs worldwide decreased from record highs in 2021, with 2,436 IPOs, according to EY.

EY stated that the sudden reversal can be attributed to various factors such as geopolitical tensions, stock market volatility, and price correction in over-valued stocks from recent IPOs.

The decline in EY's earnings was attributed to several factors, including rising commodity and energy prices, inflation, potential interest rate hikes, and the ongoing COVID-19 pandemic's impact on the global economy.

The sharp decline in global IPO activity was accompanied by a "significant" decrease in SPAC IPOs, which involve the public listing of special purpose acquisition companies.

EY reported that mega listings with proceeds of over $1 billion also declined, and there were several IPO launches postponed due to market uncertainty and instability.