(Yicai) July 18 -- Hong Kong’s stock market is experiencing a rebound thanks to improved stock market fundamentals and other favorable factors. If the US Federal Reserve trims interest rates in the third quarter as anticipated, it will make Hong Kong’s initial public offerings more attractive to investors, industry insiders told Yicai.

As expectations of a US interest rate cut in the third quarter climb, Hong Kong stocks will face a more stable market environment in the short to medium term, said Zhang Sida, an analyst at Guoyuan International Holdings. The valuation of Hong Kong stocks is still relatively low, so a trimming of US interest rates could provide better investment opportunities in the second half, he added.

An interest rate cut in the US may lead to less income from risk-free interest, and more capital will flow to the stock markets from deposits, an investment banker told Yicai. If a company goes public at this stage, it is likely to raise more funds.

The Hong Kong stock market has picked up this year. The Hang Seng Index had climbed 21 percent as of May 20 from April 16 to 19,706 points, and the average daily turnover has stabilized at above HKD100 billion (USD12.8 billion) since March, according to financial information platform Wind.

Some 107 companies had filed to go public in Hong Kong this year as of yesterday, double the number from a year earlier. Most of these firms are in the shared transport and modern tea sectors, according to the Hong Kong bourse’s website.

And of the 30 companies to float on the Hong Kong bourse in the first half, 16 were oversubscribed by more than 50 times, higher than in 2023, according to Choice data. Only nine, or around 30 percent, saw their stocks fall on their debut, a big improvement on last year’s 50 percent.

However, some financial institutions have lowered their expectations for the amount of financing to be raised by Hong Kong IPOs this year. PricewaterhouseCoopers has reduced its forecast by between 20 percent and 30 percent from the beginning of the year to between HKD70 billion (USD9 billion) and HKD80 billion, while Deloitte has dropped its forecast by between 20 percent and 40 percent to between HKD60 billion and HKD80 billion.

Editor: Kim Taylor