Goldman’s top banker says many Chinese IPO clients considering shift to Hong Kong from US exchanges

·5-min read

More than half of Goldman Sachs’s pipeline of Chinese companies pursuing initial public offerings in the US are considering shifting their listings to Hong Kong, amplifying a trend of firms seeking to raise funds closer to home, according to one of its top bankers in Asia.

Increased geopolitical tensions between the US and China, combined with regulatory tightening by both Beijing and Washington this summer and weaker institutional investor sentiment for American listings by Chinese firms, is tilting the consideration in favour of the Hong Kong stock exchange, said Iain Drayton, co-head of investment banking for Asia excluding Japan.

“While the US will continue to be very attractive for Chinese companies, due to all of these factors, Hong Kong stands to benefit and already has,” Drayton, who is based in Hong Kong, said in an interview with the Post. “The trend will continue.”

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Hong Kong ranked third globally for new stock offerings and secondary listings this year through October 29, with US$38.02 billion of proceeds, according to financial data provider Refinitiv. Nasdaq topped the league table with US$76.6 billion, followed by the New York Stock Exchange (NYSE) with US$52.2 billion.

The Shanghai Stock Exchange and its Star Market ranked a close fourth with US$36.9 billion in proceeds. The Star Market is expected to host the biggest IPO globally this year when Syngenta Group, the Swiss agrichemicals giant owned by state-backed China National Chemical Corporation (ChemChina), goes public.

Goldman climbed one rung to fourth in Asia ex-Japan equity offerings this year through last week, garnering a 6.4 per cent share of the US$332 billion of proceeds credited to deal managers, according to Bloomberg data. Citic Securities, Morgan Stanley and China International Capital Corp led the league table.

A crackdown on the tech sector in China this summer, alongside new rules for overseas listings, have unnerved investors and caused a number of Chinese companies to pause or rethink plans to list in New York this year.

At the same time, the US Securities and Exchange Commission is asking for additional disclosure by Chinese companies – and, in some cases, Hong Kong firms – about potential regulatory risks presented by Beijing.

Iain Drayton says the “balance of activity” in the IPO business is coming to Hong Kong. Photo: K.Y. Cheng
Iain Drayton says the “balance of activity” in the IPO business is coming to Hong Kong. Photo: K.Y. Cheng

Against that backdrop, Hong Kong is seen as a safer venue for many Chinese issuers seeking foreign capital, Drayton said.

“This does not mean the US tap for Chinese issuers is turned off,” he added. “It remains appealing, but access will be sector- and name-dependent. In fact, we have a few things that will come to New York in the coming weeks or months. It’s just that the balance of activity is coming here.”

Despite a weak third quarter for new IPOs, there are positive signs for future listings in Hong Kong.

Nicolas Aguzin, the CEO of the city’s bourse operator Hong Kong Exchanges and Clearing (HKEX), said last week that the pipeline for IPO applications in Hong Kong stood at more than 200 at the end of September, one of the highest levels on record.

2021 IPOs and secondary listings by market


Proceeds (US$b)

Number of Issues




New York



Hong Kong






Star Market



Shenzhen ChiNext






South Korea






Source: Refinitiv

As more privately-owned enterprises in growth sectors in China go public, there is a “snowball effect” in which those companies are likely to go back to the market to raise more capital with follow-on deals, which is a good thing for Hong Kong, Drayton said.

Repeat issuance by companies in Hong Kong is at US$70 billion year-to-date, the highest level ever, he said. That compares with about US$50 billion in follow-on activity last year.

“This evolution and the fundamental requirement for capital to fuel growth, means regardless of listing venue, after floating on the market, there is a need for follow-on issuance which has a snowball effect,” he said. “That backdrop, combined with the three factors driving a shift from New York to Hong Kong is creating an explosion of activity.”

However, there remains some lingering uncertainty, particularly given the amount of issuance activity this year.

“A very good company, three to six months ago, would have commanded a premium valuation. As we get into Q4, where there has been such an explosion of issuance activity, investors’ stomachs are full and there is a little bit of fatigue and uncertainty,” Drayton said.

“There’s going to be a compromise and it is going to come in the form that is acceptable to those investors. Then, it comes down to the individual issuer and their appetite and comfort around valuation. If you’re going to say I need that premium valuation, it may make sense to wait.”

This article Goldman’s top banker says many Chinese IPO clients considering shift to Hong Kong from US exchanges first appeared on South China Morning Post

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