UBS combines China, Hong Kong banks as it appeals to keep licence to sponsor Hong Kong IPOs
The Swiss banking giant is appealing after it was fined HK$119 million and barred for 18 months from sponsoring IPOs in Hong Kong
UBS, which is appealing against a decision barring it from sponsoring stock market listings in Hong Kong, is restructuring its investment banking department by combining its China and Hong Kong arms, according to an internal memo seen by the South China Morning Post on Thursday.
The Swiss banking giant said in its annual report in March that it had been fined HK$119 million (US$15.2 million) by the Securities and Futures Commission and blocked from sponsoring initial public offerings for 18 months. UBS said it would appeal against the fine and licence suspension and, as such, can now still act as a sponsor until a decision is reached on the appeal.
It is not known what led to the penalties but the SFC had been investigating the bank’s role as a sponsor – or lead underwriter – of some IPOs listed on the Hong Kong stock exchange, UBS said in the report.
“With the ongoing integration of the Hong Kong capital market with China, both on issuance and the investor side, the market continues to grow at a rapid pace,” said the memo sent by David Chin, head of corporate client services (CCS) Asia-Pacific at UBS.
“To ensure we capture this unique window of growth and leverage our integrated platform further, we are announcing today that the Hong Kong-based CCS China team will combine with the Hong Kong and Taiwan team with immediate effect.”
UBS is keen to compete with rival investment banks to sponsor potential mega IPOs of technology and biotech firms made possible by recent changes to Hong Kong’s listing rules. Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing, which operates the bourse, expects a dozen large tech firms with dual shareholding structures or biotech firms without revenue could debut in Hong Kong in the coming months after the new listings regime started in April.
Chinese smartphone maker Xiaomi and Hangzhou-based biotech firm Ascletis Pharma were the first to apply to float their shares while brokers are speculating that Didi Chuxing may also seek an IPO. The IPOs are expected to bring in huge sums for the investment banks which act as sponsors for them.
UBS, which first entered mainland China in 1989, recently submitted plans to increase its stake in UBS Securities to 51 per cent, which would make it the first foreign bank to own a majority of a mainland joint venture after China relaxed its foreign ownership regulations.
UBS said the newly created Greater China business would be headed jointly by Xuewen Bi and John Lee.
Bi joined UBS Securities in 2010 and will continue to be based in Beijing. Lee, who is based in Hong Kong, joined UBS at the start of 2017 as vice-chairman, Asia, and has sealed a series of key deals for the firm.