Reflections on Hong Kong’s IPO market to close out 2018

Updated: 20 Dec 2018

I can’t believe it’s the end of the year already. It seems like just yesterday that we opened the HKEX Connect Hall for the first time and ushered in the biggest change to the Listing Rules in years. It has been a very busy year, so I wanted to take a moment to reflect on our progress.

The impact of the new Listing Rules, which opened the door a bit wider to new economy companies with non-standard share structures and pre-revenue biotech companies, has already been felt in our market. So far this year 28 new economy companies have gone public in Hong Kong, including big names like Xiaomi and Meituan-Dianping. New economy firms have raised HK$136 billion so far, accounting for nearly half of our total IPO fundraising amount in 2018. On the biotech side, we’ve already seen four pre-revenue companies list under the new rules.

The changes helped power another strong year for our IPO market overall. The 209 companies that listed this year raised HK$280 billion, enough for HKEX to finish first in the global IPO fundraising table this year.

This is a good start, but it’s still just a start. Global markets were turbulent in 2018, impacted by the trade war, Brexit, interest rate increases, China’s economic slowdown, and a whole host of other factors. As an international market, Hong Kong is just as susceptible to these influences as any other market. That’s why we remain focused on strengthening the fundamentals of our market by opening up to a wider range of issuers and giving investors even more choice.

We aren’t finished tweaking things to make us more competitive. Our market still has some little idiosyncrasies, like the subscription mechanism for retail investors or the cornerstone investor arrangement, that may give issuers a stronger voice than they would have in other markets. The T+5 mechanism, where the listing date is behind the pricing day by five trading days, arguably constrains the market pricing mechanism. We had been evaluating these traits for some time already, but the introduction of new economy companies has given it some additional urgency. We’re also excited to have reached a consensus with the Shanghai and Shenzhen exchanges over the inclusion of WVR companies in Stock Connect. I’m optimistic we’ll be able to implement detailed rules in the middle of next year. Along with plans to improve our market infrastructure, we’re hopeful as the calendar turns into 2019.

There is no doubt that our market is stronger and more competitive today than it was last year at this time. We already have a wider range of companies listed in Hong Kong and a strong pipeline for 2019. We are building on our unique position as a connector between China and the international community and will continue to seek ways to make Hong Kong the world’s premier international financial centre, add value to Mainland China’s development, and welcome issuers and investors from around the world with a diverse, liquid, well-regulated financial market.

The introduction of the H-share regime couldn’t be measured by the end of 1993, or even 1994 or 1995 — but imagine our market without H share companies today. They have been instrumental to the rapid growth of Hong Kong’s market for more than two decades. I have no doubt that, when all is said and done, the new Listing Rules we implemented in 2018 will have an impact that is just as significant.