Hong Kong builds new springboard to top global IPO league with Saudi Aramco approach, tech listing reforms

Bourse operator is setting up offices in New York and Europe to reach global prospects and recently approached Saudi Aramco to list in Hong Kong
New set of listing reforms will entice companies with cutting-edge technology in cloud computing, artificial intelligence and semiconductors, UBS banker says

IPO

Enoch Yiu

Published: 2:00pm, 31 Oct, 2022

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Hong Kong is sparing no effort to regain its position as the top go-to venue for global stock offerings, including pursuing the potential listing of Saudi Aramco and easing track-record rules for companies with cutting-edge technology.

Bourse operator Hong Kong Exchanges and Clearing (HKEX), which is setting up offices in New York and Europe to support the aim, recently reached out to Saudi Arabia’s state oil company, according to Financial Secretary Paul Chan Mo-po. HKEX is separately seeking feedback about easing profit requirements for firms with hi-tech appeal, such as artificial intelligence, cloud computing and semiconductors.

If successful, it would add gloss to recent signs of rebound in the city’s initial public offering (IPO) market, albeit from domestic giants. China Tourism Group Duty Free, the world’s biggest duty-free retailer, completed its US$2.1 billion deal in August, the city’s biggest IPO this year to help elevate Hong Kong’s global IPO ranking last quarter.

“Many big tech companies could not qualify for listing in Hong Kong as they could not match the current profit or revenue requirements,” said John Lee Chen-kwok, vice-chairman and head of Greater China global banking at UBS. “The proposed reforms will allow many potential candidates in cloud computing, AI and semiconductor manufacturing to list here.”

John Lee Chen-Kwok, vice-chairman and head of Greater China global banking of UBS, seen in a May 2022 picture in Central, Hong Kong. Photo: Dickson Lee

The city’s main board was ranked the fourth most-active IPO market in September by registering HK$69 billion (US$8.8 billion) of proceeds, versus 10th place in June, according to data compiled by Refinitiv. In the biotech industry, Hong Kong has enabled 53 listings through October, trailing only the Nasdaq in New York.

Hong Kong is getting a helping hand from market regulators in mainland China to grease the wheel. The China Securities Regulatory Commission (CSRC) in September said it would allow global firms listed in the city to join the Stock Connect scheme, widening their investor base to mainland Chinese funds.

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UK insurer Prudential sees great opportunities from its listing in Hong Kong over the past 12 years. The Shenzhen Stock Exchange recently added the insurer to its list of eligible stocks in the Stock Connect trading scheme in September, according to an official statement.

“Hong Kong is a major international financial centre and an important market for Prudential,” James Turner, group chief financial officer, said in an email to the Post. “The city has proximity to the Greater Bay Area which provides access to investors from mainland China.”

Prudential initiated a dual-primary listing in Hong Kong in 2010. It conducted a stock placement in September last year to raise HK$18.5 billion to help repay older debt and fund its expansion. Given its focus on Asia, Prudential is seeking to boost its investor base in the region and the liquidity of its shares, Turner added.

Prudential makes it to Shenzhen Connect, available for Chinese funds

“With the HKEX promotional efforts, it is possible to see some international giants, such as Saudi Aramco, consider listing in Hong Kong to raise funds,” said Lee at UBS. The Swiss investment bank managed the China Tourism Group Duty Free IPO, helping it become the top sponsor in the local market this year.

HKEX is soliciting market views until December 18 on proposed changes to its listing regime that would allow pre-revenue tech companies to list on the exchange’s main board from next year. This will add to a string of reforms since 2018 that helped bring companies with weighted voting rights and pre-revenue biotech firms to Hong Kong.

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“Combined with the active and sophisticated investors that we have in Hong Kong, the new chapter is expected to help Hong Kong maintain position as a competitive market and a top choice of listing venue for issuers,” said Virginia Lee, a partner at the legal firm Clifford Chance.

More than 140 candidates have filed their applications, even as the Hang Seng Index has taken a big beating this year amid an exodus of global funds. Many are waiting for a turnaround in sentiment to launch with their listing plans, HKEX has said. With a strong IPO pipeline, UBS’s Lee said Hong Kong can regain its top spot in the global IPO market.

“The global market sentiment also counts” as the dry spell in the IPO market hit every market from Hong Kong to New York and Europe for a variety of reasons, he added. “The outlook for Hong Kong IPO markets will depend on the China macroeconomic development and its zero-Covid policy.”