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If Carlson Tong is fortunate, he could have picked the correct time to take over as chair of the Hong Kong inventory change and attempt to revive animal spirits within the metropolis that likes to invoice itself as Asia’s monetary centre.
In the week by which the board endorsed his appointment, Hong Kong’s benchmark Hang Seng index rose 8.8 per cent, its finest weekly efficiency since late 2011.
On Tong’s aspect is the promise of additional assist from Beijing for the territory’s inventory market. China’s securities regulator, saying the strikes earlier this month, underlined the significance of Hong Kong as a monetary centre.
Support is sorely wanted for the market. Despite this week’s rally, which was pushed by mainland buyers, the Hang Seng index has fallen greater than 43 per cent from early 2021, whereas the Hong Kong Exchanges and Clearing’s share value dropped greater than 51 per cent over the identical interval.
The issues confronted by the change have been underlined this week when a string of preliminary public choices — together with the town’s largest this 12 months — sank on their first day of buying and selling.
A Hong Kong-based lPO lawyer described the market setting as “brutal” as everybody was “fighting for their own survival”.
“The amount of IPOs and the proceeds raised is just so bad and the sentiment is weak. It’s very hard to find investors,” the lawyer stated. “Other than China money, [at present] very few investors are really super interested in the Hong Kong and mainland China markets.”
HKEX’s weak monetary outcomes mirror the gloom: earnings sank 13 per cent within the first quarter with common every day turnover for equities falling 22 per cent 12 months on 12 months. The decline in revenues was partially offset by rising earnings from the London Metal Exchange, owned by HKEX. Still, the bourse now ranks solely tenth globally in IPO volumes thus far this 12 months, trailing behind the likes of Athens and a clutch of regional rivals.
Hong Kong IPOs have raised $604mn within the first three months of this 12 months with 12 offers — nearly all of which originated from mainland China — in opposition to $851mn for 17 offers in the identical interval a 12 months earlier. “Things are obviously not going well,” stated Dickie Wong, government director of analysis at Hong Kong-based Kingston Securities.
Turning this round is the problem for Tong, an accountant and former chair of the town’s market regulator, and Bonnie Chan, the previous co-chief working officer on the bourse who was appointed chief government final month, changing Nicolas Aguzin.
Tong informed the Financial Times in November that it was vital to “continue to promote the city as an international financial centre” and to “make sure the city could play to its strengths [as] a super connector for China to the rest of the world”. HKEX has opened places of work in London and New York in latest months.
For the brand new management group, the secret is in search of “considerable opportunities to connect with the fast-growing capital hubs of south-east Asia and the Middle East”, Chan stated this week. HKEX would additionally proceed to “capitalise on the long-term growth of China”.
Earlier this month, the China Securities Regulatory Commission introduced plans to encourage main mainland enterprises to listing within the metropolis and increase the scope of merchandise for the town’s Stock Connect schemes, which join Hong Kong and mainland China’s monetary markets. “Xi Jinping has clearly stated . . . it is necessary to consolidate and enhance Hong Kong’s status as an international financial centre,” the announcement stated.
“That’s a big lift for the market,” stated Robert Lee, a Hong Kong lawmaker. “There’s a market expectation for more measures to come out.”
But a mainland Chinese brokerage chief government based mostly in Hong Kong stays sceptical. “I don’t think [Tong’s] appointment would actually change anything. The appointment speaks to the tendency of HKEX’s operation going forward, the old-fashioned locals would lack the motivation to change or pursue reforms.”
Industry insiders are additionally not very optimistic that abroad buyers will return.
“Will foreign investors come back to Hong Kong’s stock market 100 per cent? Maybe not,” stated Kingston Securities’ Wong. “With the US election looming, China-US tensions will be ongoing and continue to cast a shadow on Hong Kong, especially for foreign investors.”
In this setting, banks together with HSBC and Morgan Stanley are chopping jobs. Law corporations together with Kirkland have additionally reduce jobs. HSBC declined to touch upon stories of job cuts however a spokesperson stated the financial institution was “continuing to invest and grow our business”. Morgan Stanley and Kirkland declined to remark.
“Everyone was geared up for China business,” stated the Asia-Pacific head of funding banking for a western financial institution. “[But] all the China guys are now trying to do south-east Asia or Japan.”
For this week’s three IPOs, demand was clearly weak.
Raising almost HK$2.6bn (US$332mn), Chinese bubble tea chain ChaPanda was the most important Hong Kong IPO thus far in 2024. But the chain, often known as Chabaidao, dipped as a lot as 38 per cent from its itemizing value at HK$17.50 on its first buying and selling day.
Shares in Mobvoi, a Chinese synthetic intelligence group that counts Google as its early backer, dropped about 21 per cent on its buying and selling debut on Wednesday. Construction providers supplier Tianjin Construction Development, in the meantime, closed 39 per cent decrease on its first buying and selling day.
It is clearly time for Hong Kong’s inventory change to “reset”, stated Sally Wong, chief government of the Hong Kong Investment Funds Association.
“As we are currently in transitional period and as [Hong Kong] is repositioning . . . With a more diversified investor base, there are still plenty of opportunities ahead,” Wong stated.