Time to revive Hong Kong’s enviable IPO past
Hong Kong can take justifiable pride in its position as one of the world’s leading centres for initial public offerings (IPOs). This not only keeps billions of dollars pumping through the system, but also buttresses the city’s claims to being the premium financial hub in Asia.
However, recent news reported that the local listings market is heading for its worst year since 2012, prompting many to pause for thought.
Admittedly, that forecast reflects the fact that, for one reason or another, around US$20 billion of major IPO deals in Hong Kong have provisionally been deferred until next year. With that being said, such postponements still serve as a timely reminder that competition between exchanges for potential listings remains as intense as ever, that up-and-coming companies in the new economy like to write their own rules and, therefore, Hong Kong’s favoured position can certainly not be taken for granted.
These important issues will be addressed at the Redefining Hong Kong Debate Series, which will take place on 21st November at the JW Marriott Hong Kong.
Organised by the South China Morning Post, the event will bring together leading experts on the field to give a candid appraisal of what can and should be done to maintain the city’s current pre-eminent role, while also showing the flexibility needed to attract listing candidates from newer industries and other countries.
“To boost Hong Kong’s status as a centre for IPOs requires regulators, intermediaries and investors to work together to build an ecosystem that can attract companies which represent the ‘new China’ story,” says Houston Huang, head of global investment banking for China at JP Morgan Chase & Co, who will be a featured speaker at the event. “Doing this is not about ‘loosening’ regulations, but instead should always be about enhancing regulations. In essence, what it requires is a more efficient framework from a structural perspective.”
While still making it a priority to ensure the quality of IPOs and the integrity of the market, Huang suggests a sensible step would be to review what other listing venues now accept as best practice.
“This includes mechanisms that allow companies without a track record of profits to tap the IPO market on a ‘disclosure’ basis,” he says. “In addition, we also need to consider introducing a proper dual-class stock system at some point in the future.”
In other respects, he notes the risk to potential growth by not putting enough focus on ‘new economy’ companies and the need to do more to educate countries covered by China’s Belt and Road economic initiative about Hong Kong’s advantages as a listing centre.
“Global investment banks can also play an important role in this type of promotion,” Huang says.
Fellow speaker Gary Ngan, chief financial officer of Meitu, agrees that a concerted campaign to emphasise and explain Hong Kong’s pluses as a listing destination for Belt and Road countries makes obvious sense. This should stress that, uniquely, both mainland China and international funds can freely trade shares on the local bourse.
“Also, instead of spending time trying to differentiate between the old and new economies, we should focus on understanding which technologies will drive tomorrow’s world and which business models will fit best,” Ngan says.
He adds that there could also be greater efforts to enhance the two existing Stock Connect schemes, which facilitate cross-trading between the Hong Kong and mainland equity markets.
“We welcome all measures that will attract more listings of quality companies,” Ngan says. “At the end of the day, though, transparent disclosure is the key to driving a healthy capital market.”
Albert Ng, chairman for China and managing partner, Greater China, for professional services firm EY and Julia Charlton, Partner of Charltons will also be joining the debate. For details and registration, please visit our event website at redefininghk.scmp.com