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The backstory: Hong Kong's initial public offering (IPO) market has long been a global hotspot, attracting tech giants like Alibaba, Xiaomi, JD.com, Meituan and many others. The Hong Kong Stock Exchange (HKEX), the stock market operator, has made itself attractive with regulatory tweaks like allowing dual-class share structures and relaxing listing requirements for biotech firms, even if they're not yet profitable. Meanwhile, it also faces competition from stock exchanges in Shanghai, Shenzhen and Singapore.
More recently: Recent stats from Deloitte paint a grim picture for the Hong Kong IPO market, with only 44 launched in the first nine months of the year – the lowest in a decade. The consulting firm also reports a 61% drop in fundraising compared to the previous year.
Despite this challenging backdrop, some heavyweights are gearing up in Hong Kong's IPO pipeline. The Midea Group, known as the world's largest home appliances manufacturer, has plans to submit its listing application as early as October, aiming to raise US$1 billion. Alibaba's logistics unit Cainiao also officially filed to go public in Hong Kong.
The development: HKEX is now set to launch its new digital IPO settlement platform called Fast Interface for New Issuance (FINI) on November 22 to make the process easier and boost investor sentiment.
So, what's the deal? The current IPO system, Central Clearing and Settlement System (CCASS), is done after November 21. FINI will handle all new listings whose prospectuses drop on or after that date. FINI, a cloud-based system, will reduce the waiting time between IPO pricing and share trading from five business days to just two.
This transformation allows various stakeholders to collaborate digitally, from IPO sponsors and underwriters to legal advisers and regulators. Plus, FINI's introduction of a public offer pre-funding model aims to tackle the issue of locked-up funds in hotshot IPOs.
“The new platform also underpins HKEX’s steadfast commitment to further strengthening the competitiveness and attractiveness of our markets, modernizing Hong Kong’s market infrastructure and promoting collaboration,” said HKEX CEO Nicolas Aguzin.
“Many IPO candidates continue to wait and see for a turnaround in market valuations while preparing and planning their offerings,” said Robert Lui, Southern Region Hong Kong offering services leader of the Capital Market Services Group at Deloitte China.
“The capital market should change in a way that can help professional investors, venture capital and private equity investors to unleash and drive the market, in order to support the Hong Kong IPO market and its ecosystem for long-term, healthier development,” said Edward Au, Southern Region managing partner at Deloitte China.
“FINI is the right step for Hong Kong as an international finance centre and it will help upgrade its financial infrastructure,” said Robert Lee Wai-wang, a lawmaker for the financial services sector and CEO of local brokerage Grand Capital Holdings.