This year has been a difficult one for initial public offerings globally, and Hong Kong is no different. The first half of 2016 saw 38 IPOs raising a total of HK$43.5 billion ($5.6 billion), according to Deloitte, down from 46 deals that raised more than HK$129 billion in the same period last year; this is likely a result of its reliance on China’s economy, which is slowing.

Even then, Hong Kong rules the roost in terms of IPOs globally. Overriding sluggish investor appetite, the city has remained in first place this year, both in terms of funds raised and the number of listings, and it is expected to maintain the lead going into the second half of the year.

“I think IPOs will continue to be popular especially with respect to technology and health-related sectors. There has been a lot of private equity invested in Chinese companies looking for an exit,” says Allan Yee, a partner with Norton Rose Fulbright in Hong Kong. “The real question is whether Hong Kong will continue to be the place companies prefer to list.”

Hong Kong as a financial hub sees more than its fair share of mega deals largely due to its relationship with China. The year saw one landmark IPO in 2016 – China Everbright Securities’s $1.03 billion listing – being completely dwarfed by Postal Savings Bank of China (PSBC) posting an offering of $8.1 billion on the Hong Kong Stock Exchange, the highest global offering this year. The PSBC IPO also set a world record number for the number of bookrunners, with 26.

According to many, PSBC’s offering is a litmus test, and therefore may catalyse many more deals on this giant scale, to be fought for by those law firms with Hong Kong offices primed to take on its pyramid-topping work.

Deloitte says that there are three to four IPOs each expected to raise close to HK$8 billion in the pipeline for Q4 of this year. Additionally, Ant Financial Services Group, Alibaba’s financial arm which owns popular e-payment tool Alipay, is reportedly planning to raise at least $10 billion in an IPO next year. 

Back to top


Though Hong Kong’s IPO market is globally strong now, a proposed shake-up (see below) which would see more power given to the Securities and Futures Commission (SFC) that has already met with plenty of opposition from brokers may still go through, weakening its claim for the top work.

However, the most bespoke deals are nevertheless becoming a rarity, according to Yee. PSBC’s, for example, was Hong Kong’s largest IPO since 2010. “In addition, as Singapore relaxes its regulations and Shanghai opens up further, Hong Kong will face some serious competition.” notes Yee. “The Hong Kong regulators need to take a practical approach in balancing commerce without over-regulating to stay competitive. This isn’t an easy task, for example, the current joint consultation between the SFC and HKEx to overhaul listings reflect many of the tensions in striking the right balance.” 

On top of this, Yee believes “As China matures, Hong Kong will need to ween itself off its dependence on these types of deals to remain on top” as China’s capacity to deal with these issues domestically will only strengthen. Lately, a number of Chinese companies have chosen to list on mainland bourses. Chris Thomson

Back to top

Hong Kong extends listing rules consultation amid opposition

Hong Kong’s securities regulator and stock exchange in September extended the deadline by two months for responses to a consultation on reforming the city’s listing regulation, sparking fears the proposal may be in jeopardy.

The decision to extend the deadline to November 18 comes amid growing controversy over the proposal, which has pitched the city’s banks and The Chamber of Hong Kong Listed Companies, who oppose the changes, against international asset managers, who are in favor of reform.

“In light of the great deal of interest and a wide range of views expressed... and given that much of the consultation period coincided with the summer season, an extension will give all interested parties further time to file their submissions,” the Securities and Futures Commission (SFC) and Hong Kong Exchanges & Clearing (HKEx) said in a statement.

In June, the two bodies had proposed changes to Hong Kong’s stock market listing regime that could curb the regulatory powers of the exchange and hand more authority to the watchdog. The proposals aim to address possible conflicts of interest in the current framework where HKEX acts as both the profit-driven market operator and regulator of initial public offerings (IPOs).

The Chamber of Hong Kong Listed Companies and the banking sector are pushing back on the reforms, which they fear could give the SFC too much power and potentially stymie the IPO market, according to industry insiders and local media reports.

This has put them at odds with asset managers and corporate governance activists, including BlackRock, the world’s largest asset manager, and ICI Global, the international body representing asset managers, who have both come out publicly in favor of reform.

Michael Cheng, a consultant solicitor at law firm Andrew WY Ng & Co in Hong Kong, and former SFC and HKEX executive, said the strong opposition to the proposal would make it tough for the SFC and HKEX to stick to their original plan.

“Even if the regulators are trying to take a robust position, due to the level of opposition they have reached a stage where it may be challenging to move into the next phase of the consultation. This could mean the proposal is potentially at risk,” Cheng added.

David Webb, Hong Kong’s leading investor activist, said in his consultation response that the Hong Kong law still allows SFC to take more control of the listing function despite the opposition, provided the government has the “courage and foresight to back the SFC”.

The proposals come after investor criticism of possible conflicts of interest in the current framework where HKEx acts as both the profit-driven market operator and regulator of IPOs. HKEx has also clashed with the SFC over listing matters.

In the 2013 run-up to Chinese e-commerce giant Alibaba Group Holding’s blockbuster listing, HKEx came out in support of Alibaba’s socalled weighted voting rights while the SFC blocked the shares.

Under the new proposals, two new committees will be created to develop and regulate listing policies in Hong Kong. HKEx’s CEO will no longer sit on the listing committee while the SFC’s CEO will sit on the newly created listing policy committee.

The listing policy committee will steer overall policy on listing rules within the stock exchange while the listing function will continue to remain with HKEx. 

The new regulatory structure will help the exchange and SFC better spot and address problems in the market, including market manipulation, back door listings and the rise of shell companies, the SFC and HKEx said earlier.  Michelle Price, Reuters

Back to top