Closing IPOs is challenging in these tricky markets. Hong Kong has had its fair share of new listings pulled, delayed or indefinitely postponed over the last year. The Securities and Futures Commission's response has been to turn the screws on new issue sponsors and, now, on auditors.
What is also needed, I would argue, is more flexibility to generate investor demand.
Take retail (public) investors. Hong Kong is the only market in the world I know that applies claw-back triggers. This means the size of the offer to the public (rather than to institutional investors), normally set initially at 10 per cent of the total deal, increases in sync with its amount of over-subscription. So, if that 10 per cent tranche is subscribed more than 15 times, its size increases to 30 per cent. If it's covered more than 50 times, this jumps to 40 per cent. And it can even reach 50 per cent if the retail offering is more than 100 times subscribed.
On occasion, these triggers can be lowered for multibillion-dollar deals so that the public offer doesn't become unmanageably large.
But it has been a long time since this mechanism was triggered for a sizeable initial public offering (IPO). One of the last such deals in recent times was the IPO of MGM China last year in May.
The Hong Kong exchange published a survey this year in April that concluded that the participation of public investors (in absolute terms) in the stock market had reached an all-time high.
However, other statistics on its website show that, on a relative basis, retail investors' share of securities trading (excluding futures and options) has dropped from a high of 34 per cent in 2003-04 to 22.3 per cent in 2010-11.