⏎ Words Summary from News
Hong Kong is seizing every opportunity to consolidate its role as a global financial centre, leveraging unique advantages and national strategies. This piece, the second in a miniseries focusing on the city’s financial industry ahead of the handover anniversary, explores the likelihood of an “IPO Connect” that could inject much-needed liquidity into the market and deepen international investors’ access to top-tier China assets. At every summer’s Lujiazui Forum, attended by China’s top financial regulatory officials, policy announcements are closely watched by Wall Street banks eager for deeper penetration into the Chinese market. The rivalry between Shanghai and Hong Kong is just as closely watched. Both have long vied to be Asia’s leading global financial centre, but since last year they have been urged to “join hands” and pursue “synergy” – often interpreted as Beijing’s way of dividing their work. In his vision, the scheme would start with limited participation by qualified professional investors such as mutual funds, insurers and pension funds, which would subscribe to Hong Kong IPOs through the existing Stock Connect infrastructure. It could extend access to other individual investors in a second phase. HSBC Asia-Pacific chairman Peter Wong Tung-shun also floated an IPO Connect proposal on the eve of the “two sessions” in March, aiming to let investors in both Shenzhen and Hong Kong participate in IPOs on both markets. The Hong Kong stock exchange raised US$20.42 billion from 59 listings in the first five months of this year, according to LSEG Data & Analytics. A total of 19 mainland-listed companies came to Hong Kong for additional listings, offering US$12.23 billion worth of new shares.
Key Takeaways
- Both have long vied to be Asia’s leading global financial centre, but since last year they have been urged to “join hands” and pursue “synergy” – often interpreted as Beijing’s way of dividing their work.
- At last week’s edition, Hong Kong secured approval to launch long-awaited yuan Treasury bond futures in August, while Shanghai reaped a wide range of benefits, including offshore bond sales and forex trading in its pilot free-trade zone.
- Global investors, however, want more opening under closer collaboration between the two cities.
- An “IPO Connect” would be a “good step towards further integrating the Hong Kong and Shanghai complex”, said Gokul Laroia, Asia CEO and co-head of global equities at Morgan Stanley, at a panel of the Lujiazui Forum on June 17.
- Investors on both sides would be keen to tap the primary market, given “the prolific pipeline of very exciting companies” preparing to list, said Laroia.
Insights & Analysis
- Both have long vied to be Asia’s leading global financial centre, but since last year they have been urged to “join hands” and pursue “synergy” – often interpreted as Beijing’s way of dividing their work.
- Global investors, however, want more opening under closer collaboration between the two cities.
- Expansion of the connect scheme The concept of an IPO Connect was first floated in 2016 by Charles Li Xiaojia, then CEO of bourse operator Hong Kong Exchanges and Clearing, but it never gained regulatory traction during his tenure, which ended in 2020.