Hong Kong Exchanges & Clearing Ltd: A New Era for IPOs

Hong Kong Exchanges & Clearing Ltd has made a bold move to cement its position as a global leader in the initial public offering (IPO) market. The company’s latest rules are a clear attempt to boost its already thriving IPO market, and they’re doing it with a heavy hand.

The new rules will ease minimum float requirements for mainland China-traded companies seeking to list in Hong Kong. This means that companies will be able to raise capital more easily, but at what cost? The reality is that this move will only serve to further concentrate wealth in the hands of big funds, while retail investors are left with a paltry 35% of new listings. This is a clear example of the “wealth gap” in the IPO market, where the big players get bigger and the little guys get left behind.

But don’t just take our word for it. The numbers speak for themselves:

• The top 10 IPOs in Hong Kong last year raised a total of $13.4 billion, with the top 5 IPOs accounting for over 50% of the total.
• The average IPO in Hong Kong last year raised $143 million, with the median IPO raising just $20 million.
• The top 5 IPOs in Hong Kong last year had an average market capitalization of $2.5 billion, while the median IPO had a market capitalization of just $150 million.

These numbers are a stark reminder of the reality of the IPO market in Hong Kong. The big players are getting bigger, while the little guys are struggling to get a foothold. And with the new rules, it’s only going to get worse.

But what about the benefits of the new rules? Won’t they attract more international investors and maintain Hong Kong’s competitiveness in the global IPO market? The answer is a resounding “maybe”. While it’s true that the new rules may attract more international investors, it’s also true that they will only serve to further concentrate wealth in the hands of big funds.

In the end, the new rules are a clear example of the “revolving door” between regulators and the financial industry. The regulators are making rules that benefit the big players, while the little guys are left to fend for themselves. It’s a classic case of “regulatory capture”, where the regulators are more interested in serving the interests of the big players than in serving the public interest.

The market may be optimistic about the new rules, but we’re not buying it. The reality is that these rules will only serve to further concentrate wealth in the hands of big funds, while retail investors are left with a paltry 35% of new listings. It’s a recipe for disaster, and we’re not afraid to say it.