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People crossing a busy road in Central, Hong Kong after the Lunar New Year in January 2023. Photo: Elson Li

Hong Kong, Singapore show up late for SPAC party before Fed sparked global hike in interest rates: analysts

  • SPACs are restricted to professional investors, and only five have successfully floated their shares in Hong Kong to date
  • Hong Kong and Singapore both arrived too late for the SPAC party, a broker says, just before the Federal Reserve started tightening its policy

A spike in global interest rates and tough regulatory requirements have combined to stunt the expansion of special-purpose acquisition ­companies (SPACs) in the Asia-Pacific region, industry experts said. A favourable turn on both fronts may reignite the concept.

Hong Kong and Singapore evaluated new rules for SPACs in 2021 after a sudden boom in initial public offerings (IPOs) by so-called blank-cheque companies in 2020 and 2021. Most of the US$245 billion in listing proceeds were generated in the US market.

Some 14 shell companies filed to list in Hong Kong last year after the new regime came into force in January 2022, according to data published by bourse operator Hong Kong Exchanges and Clearing. Five successfully floated while six applications lapsed, leaving three in the pipeline.

“Hong Kong and Singapore arrived late for the SPAC party,” said Louis Tse Ming-kwong, managing director at Wealthy Securities. “There was a time when interest rates were cut down to zero to support economies hard hit by the pandemic, with massive liquidity for SPAC investments. When the cost of funding started to increase, investors quickly shunned SPACs.”


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The SPAC frenzy died as the Federal Reserve began its lift-off in March last year in what would be the most aggressive tightening since the mid-1990s. The Fed has since raised its key rate in eight successive meetings, from near-zero to a range of 4.5 per cent to 4.75 per cent, and is poised to raise them again later this month, according to Fed funds futures.

SPACs are created – and typically anchored by well-known public figures, including celebrities and entrepreneurs – with the objective of raising capital to buy income-generating assets. In Hong Kong, a SPAC needs to raise at least HK$1 billion (US$128 million) from sophisticated investors and must announce an acquisition within 24 months.

In Hong Kong, SPACs backed by former Olympics gymnast Li Ning, New World Development CEO Adrian Cheng ­Chi-kong have submitted their IPO plans, while one backed by former Hong Kong Monetary Authority CEO Norman Chan Tak-lam successfully listed last August.

Former HKMA CEO Norman Chan Tak-lam, co-owner of HK Acquisition Corp, a SPAC listed in August 2022. Photo: Xiaomei Chen

“It is a bit unfortunate,” said Victoria Lloyd, a partner in law firm Baker McKenzie’s capital markets practice in Hong Kong. “The high interest rates right now are making SPACs an unattractive investment product.”

She said that many SPAC issuers have also found it hard to find an acquisition target. As a result, some investors have indicated that they prefer to place their money in fixed-deposit accounts, instead of locking up their cash for at least two years in a SPAC vehicle, she added.

Unless the stock exchange operator is willing to compromise on the listing requirements, it would be difficult to improve the market sentiment towards SPAC IPOs, Lloyd added.

UBS Group’s Lee says successful mergers or acquisitions could sparkinterest in SPACs again. Photo: Dickson Lee

To be sure, SPACs serve as a good listing option for issuers, said John Lee Chen-kwok, the Hong Kong-based vice-chairman and head of Greater China global banking at UBS, which sponsored three of five such Hong Kong IPOs last year.

“There are still companies showing interest in such investment vehicles,” he said. “When there are some successful examples to show companies can be listed by way of merging with a SPAC, it may help attract companies to consider the SPAC way again.”

While SPACs may not work well in a rising interest rate environment, their appeal will recover when the cycle reverses, according to Kenneth Ho Shiu-pong, head of equity capital markets at Haitong International.

The introduction of the SPAC listing regime is important as “this will allow a wide array of companies to tap the capital markets in a regulated manner,” he said. “When the interest rate may go down again in future, we will see more SPAC listings again.”