Hong Kong bourse joins regulators to fight to host world’s biggest IPO

‘The stock exchange alone would not be able to fight for the [Aramco] listing’, expected to raise up to US$100 billion, says HKEX chief executive

PUBLISHED : Wednesday, 26 April, 2017, 8:01pm
UPDATED : Wednesday, 26 April, 2017, 10:27pm

Hong Kong Exchanges and Clearing said it is working with local and mainland authorities to fight to get Saudi Arabia’s national oil giant, Aramco, to list in Hong Kong in what would be the biggest initial public offering in history.

“For a giant company like Saudi Aramco, the stock exchange alone would not be able to fight for its listing in Hong Kong. We are working with the Hong Kong and central governments and all related authorities to try our best to fight for its listing here,” said Charles Li Xiaojia, chief executive of HKEX, which operates the local bourse.

Its listing here would be good for China, enabling it to play a more important role in the international resources market
Charles Li Xiaojia, chief executive, HKEX

“We are working very hard on it and we welcome Saudi Aramco to choose to list here in whatever format it prefers. Its listing here would be good for China, enabling it to play a more important role in the international resources market.”

Addressing reporters after the bourse’s annual general meeting on Wednesday, Li said if Hong Kong was in a position to launch the “IPO connect” scheme at the same time as the Aramco listing, it would provide an additional incentive for the oil leviathan to list here. HKEX is working with Hong Kong and mainland regulators on a link which would allow international investors to subscribe to newly listed A-shares, while mainlanders could subscribe to IPOs in Hong Kong.

The existing stock connects between HKEX and the two stock exchanges in Shanghai and Shenzhen only allow investors to do cross border trading in companies already listed.

“It would be the perfect match to launch the IPO connect and the Saudi Aramco IPO at the same time,” he said.

Aramco has already appointed HSBC as one of its advisers for the flotation which is expected to raise up to US$100 billion, the biggest sum ever raised through a shares listing. That estimate is based on expectations that Aramco will offer 5 per cent of its equity, valuing the company at about US$2 trillion.

The state owned oil company is still considering possible venues for its debut, with New York, London, Hong Kong and Tokyo the main contenders.

Li said that since the Middle East and mainland China have a good political relationship, Hong Kong stood a good chance of winning. But brokers point out London and New York have traditionally been the destinations of choice for oil companies to raise funds.

The Securities and Futures Commission two weeks ago issued a statement declaring it would ease listing conditions for companies linked to “One Belt, One Road” initiatives to help develop Hong Kong’s stock market. A source at the SFC told the Post that this more flexible approach would apply to Aramco if it decided to float its shares in Hong Kong.

Hong Kong is keen to expand its IPO market after it lost out to New York, Shanghai and Shenzhen to rank as the fourth largest IPO market worldwide in the first quarter. A lack of new mega listings meant the city lost its coveted No 1 spot which it had held in 2015 and 2016.

Li said the exchange would soon launch a consultation paper about introducing a third board for new listings of technology firms including those wanting to float with a dual-class share structure – something currently banned from the main board.

He refused to comment about the 25 per cent cut to his bonus last year, the result of lower turnover denting the stock exchange’s profits.