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The pros and cons of investing in IPOs in Hong Kong

2 Mins read

The amount of Initial Public Offerings (IPOs) has increased recently in Hong Kong, with a record number being launched in 2017. There is a lot of money to be made from IPOs and their risks. This article will examine the pros and cons and give some advice for those looking at investing in IPOs.

The pros of investing in IPOs in Hong Kong

When you want to get in on high-growth, emerging companies at their early stages, IPOs (Initial Public Offerings) are the way to go. Most major cities have a stock exchange that trades in these shares, and Hong Kong is among them with its Stock Exchange of Hong Kong Limited.

It’s important to note that when a company decides to make an IPO, they’re doing so because it will help them expand or achieve some other kind of financial goal. This means that most companies going through the process aren’t profitable yet. Still, many are taking this route even though they already have revenue from their business activities. How can someone learn about what companies might be suitable investments?

Hong Kong has been making efforts to become the go-to destination for listing companies. In 2014, there were a record 23 IPOs on the SEHK with a total value of about 20 Billion. This means that companies see it as beneficial to list their shares here, and investors can get in at this early stage.

Most companies make their IPO announcement within 3 to 6 months before conducting the share offering (although some companies wait until just weeks beforehand). If you’re looking to make investments, it’s best to research upcoming possibilities ahead of time because investing right after an IPO may mean you’ll be paying premium prices for them. Avoid taking out loans or making other commitments related to these investments without firm proof that they will happen (and especially not before the official announcement).

Another benefit that IPOs have for investors is that they generally increase in value once they launch on the stock market. Since there is high demand for these shares, this often results in investors receiving a good return on their investment when the IPO launches. For example, internet giant Tencent’s share price increased by 40% upon their IPO in 2004.

The cons of investing in IPOs in Hong Kong

It’s important to note that when a company decides to make an IPO, they’re doing so because it will help them expand or achieve some other kind of financial goal. This means that most companies going through the process aren’t profitable yet. Still, plenty are taking this route even though they already have revenue coming in from their business activities.

Another downside of IPOs is that there are often problems associated with them. For example, investors may struggle to secure the stock once it becomes available, as demand for these shares increases significantly (which pushes prices up). There is also a greater risk involved when investing in an IPO, given that they are generally less well known than companies that have been on the market for several years. This means that there can be more volatility and uncertainty about what kind of financial returns will be made by the company after launch.

Conclusion

If you consider investing in an IPO, you should research what kind of returns you can expect from a particular one. Look at past records of companies who have launched their stock on the market after going public. Has their performance been profitable? What has been happening within their industry? If you have any questions about a possible investment opportunity, it is not a good idea to invest your money in the IPO. Beginner traders are advised to make use of reputable online brokers Saxo Bank.

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