Hong Kong Seeks to Speed Up IPO Process

The world's largest IPO destination seeks to modernize its exchange to attract more listings. As New York turns away from Chinese IPOs, Hong Kong may open its arms.

Author: Anthony Russo   

Hong Kong is exploring speeding up its IPO process from pricing to trading in an effort to outperform rival exchanges. This week, Hong Kong Exchanges & Clearing Ltd. will meet with brokers and consider a proposal that would shed the current IPO settlement cycle of five business days, as reported Bloomberg today. Assuming there aren't any major objections, it will "formally consult" the market in the upcoming weeks, the report said.

The world's largest listing spot is the only major global market where IPO settlements take five business days. In 2019, Charles Li, the chief executive officer of the HKEX flirted with IPO settlements being cut to one day. The HKEX has said that it has been exploring a model to "modernize" its settlement process. 

"A shorter settlement period would reduce the overall risks and uncertainty faced by issuers and investors with the added benefit of a shorter lock-up time of investor funds," Joelle Lau, a partner-in-charge of Hong Kong at the law firm Jones Day.

She added, "It's a much-anticipated change, which reflects a move away from the traditional reliance on paper forms in the Hong Kong IPO process."

The news comes as the Hang Seng Index has changed its rules to include tech giants Alibaba Group Holding Ltd., (NYSE: BABA; HKEX: 9988) Xiaomi Corp. (HKEX: 1810) and Meituan Dianping (HKEX: 3690) on its benchmark. At Tuesday's close, the HSI rose nearly 2% to 24,388.13 points on positive vaccine news that came from the Cambridge, Massachusetts-based biotech company Moderna, Inc. (Nasdaq: MRNA) on Monday.

Meanwhile, in New York, Nasdaq is planning on tightening restrictions to make it tougher for Chinese companies to seek IPO's on its stock exchange, as reported by Reuters on Monday. The stock exchange is also delisting Luckin Coffee Inc. (Nasdaq: LK) after the beverage maker's fraud scandal. 

With trade tensions picking up, expect fewer Chinese companies in New York, and more in Hong Kong.

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