Hong Kong to shorten IPO process to attract listings
The Hong Kong Stock Exchange plans to reduce the time between the pricing of a company’s IPO and its commercial debut to two days from five as part of efforts to make the listing process more efficient and encourage more companies to go public in the city.
The redesign will be done through a new web service called Fast Interface for New Issuance (FINI), which will allow IPO market participants, advisors and regulators to digitally interact and coordinate more effectively throughout the entire process. IPO, according to A declaration released on Tuesday by the exchange operator, Hong Kong Exchanges and Clearing Ltd. (HKEX). The change is expected to take place no earlier than the fourth quarter of next year.
The change will also reduce the blocking time for investor funds during the IPO subscription period, an issue that can currently negatively impact market liquidity if the company raises a large amount of money and increases risk. for investors to buy new issues.
“The introduction of FINI will shorten the cycle between IPO pricing and the start of trading, which will boost market efficiency and strengthen Hong Kong’s position as the world’s leading IPO market.” HKEX CEO Nicolas Aguzin said in the statement.
The redesign was offers in a consultation paper released by HKEX in November. Initially, the exchange planned to shorten the settlement period to a single day, but many market participants complained that the timeline was too tight for institutional trade allocation, pre-match, and place verification, which resulted in which could lead to unnecessary settlement failures, HKEX said in a report Tuesday.
Of the 49 respondents who commented on the proposal, including trade associations, brokers, investment banks and commercial banks, more than 15 called for revising the settlement cycle to two days. They said the change would align the Hong Kong IPO process with the markets of New York and most European countries, which typically adopt a two-day settlement cycle.
HKEX said the shortening of the settlement period was widely supported by stakeholders. One respondent said Hong Kong’s current five-day settlement cycle makes the period of exposure to market risk “too long and out of step with most other major listing places,” according to the report.
“(A) a shorter IPO settlement process would reduce the impact of foreign circumstances on IPO price discovery and allow IPO issuers and investors to better take advantage of market conditions,” according to the report. “This can lead to more truthful thinking about IPO valuations and support investors’ willingness to engage in stock offerings.”
Many Chinese companies listed in the United States are applying for a secondary listing in Hong Kong amid growing geopolitical tensions between China and the United States. The shorter two-day cycle could reduce investor exposure to fluctuations in the U.S. stock market, Bonnie Chan, head of listing at HKEX, said at a press conference on Tuesday.
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