Hong Kong’s capital market, trading platform, major drawing cards for mega IPOs
The listing debut of Postal Savings Bank of China, which ranks as the largest IPO worldwide in the last two years, shows that Hong Kong’s capital market is a favoured destination for mega share sales, according to Secretary for Financial and the Treasury Chan Ka-keung.
China Postal Saving raised US$7.3 billion after pricing its shares at HK$4.76 a piece, becoming the largest IPO since the September 2014 listing of Alibaba, which raised US$25 billion after exercising an over-allotment option.
“Of course it is not very often we will see a sizeable IPO like the Postal Savings Bank. This is why Hong Kong would always need to think of ways to improve our competitiveness by adapting our platforms to attract different types of companies to list here,” Chan said after attending Postal Saving’s listing ceremony at the exchange.
“The government supports the SFC and the stock exchange to review the listing rules to attract more new economy, technology-related or other types of companies to list here. This would diversify our markets and enhance the competitiveness of Hong Kong,” Chan said.
Chan said he was neutral on whether Hong Kong needed a new third board with relaxed listing regulations to attract technology companies.
Chan said consultation over a listing reform proposal to set up two committees with equal representatives from the SFC and the HKEX has been extended for two months until November, which will allow more market participants to make submissions.
“There are many different views on the reform, which is good. The SFC and HKEX will listen to all views to make a conclusion,” Chan said.
SFC chairman Carlson Tong said submissions have been received that both support and oppose the proposed amendment.
HKEX chief executive Charles Li Xiaojia said the exchange would consider all possibilities, including revamping the Growth Enterprise Market to attract more new economy companies.
“We are working very hard to attract more new IPOs and to enhance market quality,” Li said.
Li said he did not see a problem with the sizable portion of Postal Savings’ IPO being taken up be cornerstone investors.
“The cornerstone investors ensure the IPO is successfully launched. Without their support, the IPO may need to be delayed, ” Li said.
He added that the significant portion of the offer given over to cornerstone investors would not impact liquidity in the shares, even as these investors face a six-month lockup on their holdings.
Li Guohua, chairman of Postal Savings Bank Co. of China, acknowledged that Wednesday’s trading debut had failed to advance much above the offer price, but said the event had been a success.
“I think the market response has been quite collective because looking at today’s stock price being sustained at HK$4.76 to HK$4.77, I believe that it is pretty ideal,” he said. “The bank’s IPO this time mainly relied on ordinary capital.”
While asked about the details of the IPO, including the lower-than-expected amount of funds raised and the heavy reliance on cornerstone investors, Li said he believes that investors have confidence in the bank, and the IPO was “very successful”.
“There is positive overall investor sentiment in Postal Savings Bank, and there is confidence in our future development,” he said.
Li added that the bank differentiates itself from others with its expansive business, as it is the largest bank in China with more than 40,000 branches.
“Hong Kong has a mature financial market, and by having our IPO in Hong Kong, we need to look at things from an international economic perspective,” he said. “Only by looking at the various global economic needs can we gain credibility in the market.”
The bank’s future development direction is maintaining big-scale banking services, servicing rural and urban areas, and working with small enterprise, he said.
“This way the bank can best use our resources and support economic development and remedy the problems in rural financial services,” said Li. “Our market coverage rate is 2.6 times. I believe that this is a very ideal rate for recent times.”