Macroscope | Should Hong Kong’s rules be loosened to attract more IPOs?
Recent evidence – Zhong An Online oversubscribed 391 times, China Literature breaking a 10-year record for first day trading, and gaming device maker Razer 290 times oversubscribed – suggests not
We are indeed in unusual times when the headline, “UK offers US$2B credit line to Saudi” pops up. How times have changed!
But this isn’t (yet) a bailout for an indebted nation. This is a British government loan guarantee for Saudi Aramco, the Saudi Arabian state-owned oil company, to encourage it to list in London rather than New York.
The Hong Kong stock market was always an outsider in the race to capture what could be the world’s largest listed company by market cap and our laissez faire economic policy would never allow such an inducement.
But the authorities have been agonising over capturing listings ever since Alibaba Group Holding turned its favours over to the New York board rather than us. That was something of a kick in the teeth as Hong Kong had always been the go-to place for large Chinese listings.
The reason, of course, was that New York regulations were in fact softer than those in Hong Kong. We still hold onto the original truth that one share equals one vote. That if you are to invest in a company, you should be compensated, not just by the share price going up, but also by a vote on the management should they be incompetent or criminal.
Entrepreneurs and managers do not like that (of course) and in many markets have come up with dual or limited rights shares so that issuers could have their very nicely frosted cake – and eat it.