Hong Kong’s IPO pipeline still strong despite China’s tough crackdown: HKEX

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Hong Kong’s IPO pipeline remains strong – although more caution is warranted at the moment given China’s increased regulatory scrutiny, the Hong Kong Exchange and Clearing CEO told CNBC.

“In the short term … this move is obviously going to lead some potential issuers to be a little more cautious and try to see when the time is right to go to market,” Nicolas Aguzin told CNBC’s Emily Tan on Wednesday.

Hong Kong markets tumbled in late July after China tightened rules on the private education industry as part of a broader trend of increasing regulation in sectors such as technology and ride-hailing.

Last week, gaming giant Tencent’s shares plummeted 10% after an article by Chinese state media called online gaming “opium” and urged the industry to prevent addiction in children.

“When you have volatility, people are usually a little less likely to want to plunge into the market,” said Aguzin. “But in the long term we are looking at the pipeline, there are over 200 companies … with their documents in the file.”

A record 46 Hong Kong-listed companies in the first half of 2021. Total fundraising from January to June of this year was Hong Kong $ 211.7 billion (US $ 27.2 billion), up 128% over the same period in 2020.

Hong Kong ranks third in the world in terms of IPO funds raised for the first half of 2021, HKEX said in its interim results.

HKEX revenue

The Hong Kong Exchange and Clearing announced record sales and earnings for the first six months of the year on Wednesday.

It was driven by “a buoyant IPO market, strong trading volumes and significant momentum at Stock Connect,” Aguzin said in a statement.

Stock Connect programs allow mainland investors to trade some stocks in Hong Kong known as southbound securities. The program also allows foreign investors to trade some stocks listed in Shanghai and Shenzhen – called northbound trading.

Stock Connect trading volume hit new highs with average daily turnover of 114.4 billion Chinese yuan ($ 17.6 billion) for flows northbound, up 54% over the first half of 2020.

The flows heading south had average daily sales of $ 48.1 billion, according to earnings report, 132% more than the same period last year.

“Our most important strategic and competitive advantage is to be anchored in China and connected to China,” said Aguzin.

“We have a large number of our results that have some relation to China. We think that’s great, it will continue to attract international investors, ”he told CNBC.