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UBS’s top China banker says Hong Kong still a magnet for global IPOs, with additional reforms likely to attract more start-ups in Greater Bay Area

South China Morning Post logo South China Morning Post 24/06/2022 Enoch Yiu
  • Some 2,300 companies have raised US$582 billion via Hong Kong IPOs since the 1997 handover through May 2022, according to Refinitiv data
  • Hong Kong can still grease the IPO wheel to accommodate the listing of global companies given its status as a financial hub, top UBS banker said

Hong Kong should strive to attract more global companies to the local stock market, while entrenching its position as the main funding avenue for mainland Chinese entities, according to one of the UBS Group's top China bankers.

That will help broaden the investment options for traders and money managers in the city and around the region, said John Lee Chen-kwok, Hong Kong-based vice-chairman and head of Greater China global banking at the Swiss investment bank.

"The New York Stock Exchange and London Stock Exchange have always positioned themselves not as a regional exchange, but as a global exchange," he said in an interview with the Post. "In Asia, we have not really seen sort of an international exchange yet. Hong Kong is ahead of other Asian markets in playing the role as a global exchange."

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Battery maker LG Energy Solutions raised US$10.7 billion in Seoul, the world's biggest initial public offering (IPO) so far in 2022, according to Bloomberg data. Carmaker Rivian Automotive raised US$13.7 billion in New York to take the crown in 2021. China's top chip maker SMIC raised US$7.6 billion in Shanghai to top the list in 2020.

John Lee Chen-Kwok, vice-chairman and head of Greater China global banking of UBS. Photo: Dickson Lee © Provided by South China Morning Post John Lee Chen-Kwok, vice-chairman and head of Greater China global banking of UBS. Photo: Dickson Lee

"For the Hong Kong IPO market to develop further, we need more regulatory refinement to make it easier for international companies to raise funds here," Lee said. "We expect to see new developments in the Hong Kong market for years to come, just like what we have seen in the past 25 years."

Lee is one of the longest-serving investment bankers in the local industry. He started at the Asian unit of US firm Bear Stearns in 1994, a year after Beijing allowed mainland companies to list their so-called H-shares in Hong Kong. He left Bear Stearns in 1996 to build a 20-year career at Merrill Lynch, before joining UBS in 2017.

Around 2,300 companies have raised US$582 billion of fresh capital from investors through IPOs in Hong Kong over the past 25 years, according to data compiled by Refinitiv through May 2022. The period coincided with the rise of China's economy and its technology giants such as Alibaba Group Holding and Tencent Holdings.

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In 1997, the biggest IPOs in Hong Kong were so-called red-chip companies including China Mobile, China Southern Airlines and Jiangsu Expressway. Industrial and Commercial Bank of China, Agricultural Bank of China and other state-controlled lenders dominated listings in the 2000s.

HKEX reforms that brought Alibaba, Meituan and Xiaomi listings to the city to be expanded

Since the 2018 listing reforms by bourse operator Hong Kong Exchanges and Clearing (HKEX), the city has become the favourite fundraising hub for technology-related companies. Almost 200 new-economy companies raised HK$853 billion, while 93 biotechnology firms collected HK$258.5 billion in fresh capital.

"All these deals could easily be done in Hong Kong, as it has a deep liquid market with the support of a sound regulatory system," Lee said.

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While the Hong Kong stock exchange has built a stellar reputation since the 1997 handover, the bourse has increasingly become the "offshore financial hub," either by geography or political circumstances amid the worst US-China relations in 50 years.

Chinese companies, which dominate new listings and stock trading in the city, are set to become even more influential as US-listed peers "return home" under dual-primary or secondary listings as delisting pressures mount over Western sanctions and accounting issues.

Shanghai Stock Exchange is world's No 1 IPO venue as Chinese firms return home to counter US delisting threat

Mainland companies contributed 98 per cent of total fundraising via IPOs in Hong Kong last year versus 50 per cent a decade ago, according to Refinitiv data. The 150 international companies, including Prada, Samsonite and L'Occitane, collectively make up only 5 per cent of the total market capitalisation.

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"HKEX could consider more listing reforms to attract international companies" and expand the capital ecosystem for them, said Mary Leung, head of advocacy for Asia-Pacific at the CFA Institute. "What is important is to keep the high regulatory standards and not lower the listing standard at the expense of investor protection."

HKEX considers opening international offices to take on New York and London in IPO markets

HKEX has resolved to pursue its international ambitions, with CEO Nicolas Aguzin making preparations to open offices in the US and Europe in the Coming months.

UBS's Lee applauded the decision, saying Hong Kong can catch up with rivals in the IPO market even as Shanghai and Shenzhen have threatened to overtake the city in recent months.

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"Hong Kong is a unique market in that it is part of China while under the One Country, Two Systems," he said. "It can be a market for international companies to tap funds, and for Chinese asset managers who provide a deep pool of market liquidity."

Lee believes companies in the Greater Bay Area - an economic region covering Hong Kong, Macau and nine cities in southern Guangdong province - could be another driving force for the Hong Kong IPO market. Many start-ups in the area are great candidates for listings, he added.

Still, challenges abound, such as concerns about regulatory tightening in China and global recession risks. Poor market sentiment shrunk the IPO market by almost 90 per cent in the first quarter in terms of proceeds raised, pushing Hong Kong to sixth in the global league table from third a year earlier, according to Refinitiv data.

"There are a lot of uncertainties in the macro economic and political outlook," Lee said. "However, when there's more clarity on China's regulatory regime, and when the market sentiment improves, investors will return and the companies will return to list here."

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This article originally appeared on the South China Morning Post (, the leading news media reporting on China and Asia.

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