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US Senate’s bill to fence off Wall Street from Chinese companies may turn into a helping hand to Hong Kong stock exchange
- The US Senate passed a bill to fence off Wall Street from Chinese companies, requiring non-US IPO applicants to prove they are not owned by the Chinese government
- The bill follows proposed changes by the Nasdaq to raise the bar on IPO applicants
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Hong Kong’s stock exchange may turn out to be the winner in the escalating tension between the US and Chinese capital markets, after the United States Senate passed an unprecedented bill to fence off Wall Street from Chinese companies.
The bill, which received bipartisan, unanimous support in the Senate, requires fundraising applicants to prove that they are not owned or controlled by foreign governments before they can list on a US bourse, and require them to submit audits to the US Public Company Accounting Oversight Board (PCAOB). While the bill applies to any non-US company, Louisiana Republican Senator John Kennedy – one of the bill’s sponsors – said it’s aimed at China, intended “to stop them from cheating” on US exchanges.
The bill adds to changes proposed by the Nasdaq to raise the bar on applicants for initial public offerings (IPOs), where the minimum fundraising will be increased to US$25 million, or at least a quarter of the company’s value. The additional barriers on Wall Street may redirect more fundraising applications towards Hong Kong, Asia’s third deepest capital pool, helping the city leap frog New York as the global hub for IPOs, bankers said.
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“Chinese companies with smaller market capitalisation have tended to list in the US due to better liquidity” in the world’s largest and deepest capital market, said BNP Paribas’ Asia head of equity capital markets Christopher Wong. “With tighter listing requirement by Nasdaq, and increasing US-China tension, the Hong Kong stock exchange would stand to be the beneficiary.”
This could help Hong Kong catch up in the global IPO ranking, after having been at the worldwide top in seven of the past 10 years. Hong Kong was ranked fifth globally in the first quarter, with 37 companies raising a combined HK$14.1 billion, languishing after the 21 IPOs on Nasdaq that raised HK$42.4 billion (US$5.5 billion), according to Deloitte’s data.
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