The race to secure listings is taking on a challenging edge for Hong Kong's stock exchange as its regional peers sharpen their focus on the mainland initial public offering (IPO) machine. Viewed by investors as a gateway to the mainland's growing economy, Hong Kong has been the fund-raising centre of choice for mainland firms since the first cross-border company listed on the city's bourse nearly 20 years ago.
Hong Kong attracted HK$259.8 billion in IPOs on the main and Growth Enterprise Market board last year. For the third year in a row, it ranked first globally in terms of funds raised through IPOs.
By the end of last year, 43 per cent of companies listed on the main board were mainland enterprises, contributing 56 per cent of the bourse's market capitalisation.
Other exchanges are seeking a greater slice of the mainland's listing pipeline. Singapore revealed this determination in attempting to merge with the Australian Stock Exchange last year, but it was thwarted by the Australian government.
Singapore has typically been dwarfed by Hong Kong. It raised just US$6.1 billion on its exchange last year. Hong Kong's greater liquidity makes it more able than its regional counterpart to absorb larger IPOs. It has, however, become innovative by, for example, introducing a market for real estate investment trusts (reits) in 2002 and business trust structures two years later.
Paul Lau, a partner at KPMG China, says: 'It may be beneficial for HKEx to continue exploring business trust listings in Hong Kong. The spin-off of PCCW's telecom business last November was the first business trust IPO in Hong Kong, whereas business listings in Singapore have been developed for quite some time.