HKEx faces Shanghai IPO threat
Hong Kong's golden days as the world's largest initial public offering market may be numbered, with the Shanghai Stock Exchange announcing yesterday it was 'basically ready' to allow foreign companies to list.
The Hong Kong stock exchange has been the number one IPO market worldwide in terms of total funds raised in the past two years, beating New York and London. Local listings have included such major international names as Russia's Rusal and the Italian fashion brand Prada.
Local brokers said an international board on the Shanghai exchange would hit Hong Kong hard, as it would lure potential listing candidates away from the city. But experts said it may be too early to worry.
Louis Tse Ming-kwong, director of VC Brokerage, said: 'The Shanghai international board is going to be a competitor to the HKEx, but we may not need to worry so soon, since we simply do not know when the international board will happen. The Shanghai Stock Exchange had talked many times about launching its international board soon, but there is no confirmed timetable.'
China currently does not allow foreign companies to list on the mainland. But for several years, the Shanghai Stock Exchange has planned to introduce a new international board, separate from the A-share market, for foreign firms to sell shares to mainland investors. HSBC, Coca-Cola and Bank of East Asia have expressed interest in listing there.
Shanghai Stock Exchange's executive vice-president, Xu Ming, told Bloomberg yesterday that the international board would start trading as soon as possible but did not give a firm date.
Brokers speculate that the persistent delays in the launch - the first study was carried out in November 2007 - may be related to Beijing's worries that mainland investors might prefer trading on the international board instead of the A-share market.
Joseph Tong Tang, executive director of Sun Hung Kai Financial, said some deluxe brands that had their eyes on the mainland consumer market might prefer to list in Shanghai. 'However, other international firms would still prefer Hong Kong, since it is an established free market, traded by international institutional investors,' he said.
'China's capital controls ban foreign investors from trading in the mainland markets, which means the international board will only be traded by mainlanders, which is very restrictive.'