Hong Kong's IPO market remains quiet

In October, there were 5 new IPO (Initial Public Offering) listings on the Hong Kong Exchange (HKEX) compared to 8 in September. As of October 31, a total of 52 new stocks were listed in Hong Kong, a decrease of 10 new stocks compared to the same period last year, reflecting that the market remains quiet. The 5 companies listed in October had a mixed performance in October. Among them, Shiyue Daotain (9676.HK) and Maiyue Technology (2501.HK) were 82.0% and 17.8% higher than the listing price respectively (closing price, as of 31/10/2023). On the other hand, Tian Tu Capital (1973.HK) and Luyuan Group Holding (2451.HK) were 21.7% and 13.2% lower than the listing price respectively (closing price, as of 31/10/2023).

Phillip Hong Kong Newly Listed Equities Index ETF (2835.HK)

The ETF aims to fully replicate the Solactive Hong Kong Newly Listed Equities Index, a rules-based equity benchmark designed to track the performance of securities that had a recent initial public offering or new listing on the main board of the HKEX. The Index is rebalanced quarterly, incorporating securities with IPOs or new listings within the last 756 business days, aiming for a total of 50 securities based on free-float market capitalization. The Index also undergoes monthly IPO reviews to include recent IPOs, subject to liquidity and market capitalization criteria.

October Monthly Review

During the October monthly review of the Solactive HK Newly Listed Equities Index, no new constituent was added, but a total of 3 existing constituents were removed: Giant Biogene (2367.HK), Chervon Holdings (2285.HK) and Helens (9869.HK).
New Oriental – S (9901.HK) was the better performer among index holdings in October with its share price registering a 7.3% monthly gain. The company delivers comprehensive educational programs, services and products to students across China through its nationwide physical network of schools, learning centers and bookstores, as well as pure-play online learning platforms. As of May 31, 2023, the company had a physical network of 85 schools and 663 learning centers in 78 cities and approximately 26,600 teachers. The company delivers online courses through their online learning platforms, including Koolearn.com, comprehensive online education and other services platform.
For the year ended 31 May 2023, the company’s revenue amounted to USD 2997.8 million, decreasing 3.5% YoY, of which net service revenue amounted to USD 2544.7 million, decreasing 16.6% YoY; net product revenue amounted to USD 453.0 million, increasing 720.4% YoY. Operating income amounted to USD 190.0 million, turning a loss into a profit YoY. Net profit attributable to shareholders amounted to USD 177.3 million, turning a loss into a profit YoY. In compliance with the Alleviating Burden Opinion and applicable rules, regulations and measures, the company ceased offering K-9 Academic AST Services in China since the end of 2021. Such cessation leads the company’s net service revenue to continue to decline. On the other hand, the company later developed new revenue channels, including the sale of East Buy private label products and the books and other educational materials developed or licensed by itself, which led the company’s net product revenues to surge YoY.

Top 10 holdings

In October, the top 10 holdings remained unchanged. The industries that currently account for bigger weighting in the index are namely Technology (including Baidu, Kuaishou and Bilibili), Consumer Durables (including EV companies like Li Auto, Nio and X Peng) and Consumer Discretionary (including Yum China, Trip.com and Nongfu Spring). The following table shows the top 10 holdings and sector breakdown of the Phillip HK Newly Listed Equities Index:

The Phillip HK Newly Listed Index ETF (2835.HK) Monthly performance for October

The Phillip HK Newly Listed Index ETF (2835.HK) recorded a monthly loss of 10.9% in price in August, slightly underperforming Hang Seng Index’s (HSI) 9.1% monthly loss and Hang Seng Tech Index’s (HSTI) 9.1% monthly loss. It was up 11.6% since listing, outperforming the HSI (+ 2.2%), but slightly underperforming the HSTI (+11.7%)