Monday 16 August 2021 3:55 pm

Hong Kong IPOs run dry amid concerns over China's regulatory scrutiny

The global financial hub has seen only one initial public offering so far this month, as Hong Kong’s investors are spooked by China’s tightening scrutiny across sectors.

International investors have long used Hong Kong as gateway to China, but they are increasingly concerned by Beijing’s policies, ranging from technology and education to food and health care, reported Bloomberg.

Last week, Chinese technology firm NetEase pulled its $1bn Hong Kong listing for its music streaming service Cloud Village due to recent volatility in the tech market.

Nicolas Aguzin, chief executive of Hong Kong Exchange and Clearing, said the city’s pipeline for initial public offerings remains strong through more caution at the moment given by China’s increased regulatory scrutiny, reported CNBC.

“In the short term, obviously, this movement will cause some potential issuers to be a little bit more careful and try to see when it’s the right time to go to the market,” he added.

On the contrary, IPOs come thick and fast in mainland China as Shanghai set to host the world’s two biggest listings this year despite the government’s regulatory crackdown.

With China’s intention to elevate its domestic markets through introducing a new Nasdaq-style STAR board, some Chinese investors have turned to Shanghai for public offerings.

China Telecom Corp., one of the country’s largest telecom carriers, plans to raise $7.3bn in Shanghai this month after being delisted by the New York Stock Exchange on national security grounds in January.

Syngenta Group, the Swiss seed and fertilizer business owned by China National Chemical Corp, is also preparing a $10bn listing on Shanghai’s STAR board.

Nevertheless, Chinese authorities have maintained their tight grip on the stock market as the Securities Association of China announced on Friday it has published 19 institutional investors over Shanghai’s STAR IPOs.

The regulator said that problems included weak internal controls, inadequate price-setting rationale, non-compliance with stipulated procedures, and improper storage of working papers.

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