Asia Economy

Hong Kong's IPO Pipeline Is Still Strong Despite Beijing's Regulatory Crackdown, HKEX Chief Says

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  • Potential issuers may be wary of China's regulatory scrutiny, but Hong Kong's IPO pipeline remains strong, Nicolas Aguzin of HKEX said.
  • "Over the long term, right now, we're looking at the pipeline, there's over 200 companies … with their filings in the docket," he told CNBC's Emily Tan.
  • Hong Kong Exchange and Clearing on Wednesday announced record revenues and profits for the first six months of the year.

Hong Kong's pipeline for initial public offerings remains strong — though there is more caution at the moment, given China's increased regulatory scrutiny, the chief executive of Hong Kong Exchange and Clearing told 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," Nicolas Aguzin told CNBC's Emily Tan on Wednesday.

Hong Kong markets went into a tailspin 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, shares of gaming giant Tencent plunged 10% following an article by Chinese state media that called online gaming "opium," urging the industry to prevent addiction among children.

"When you have volatility, it's usually a little less likely that people will want to rush into the market," Aguzin said. "But over the long term, right now, we're looking at the pipeline, there's over 200 companies … with their filings in the docket."

A record number of 46 companies listed in Hong Kong in the first half of 2021. Total funds raised came to $211.7 billion Hong Kong dollars ($27.2 billion) from January to June this year — up 128% from the same period in 2020.

Hong Kong is ranked in third place globally in terms of IPO funds raised for the first half of 2021, HKEX said in its interim results.

HKEX earnings

Hong Kong Exchange and Clearing on Wednesday announced record revenues and profits for the first six months of the year.

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

Stock Connect programs allow mainland investors to trade some stocks in Hong Kong, referred to as southbound securities. The program also allows foreign investors to trade some stocks listed in Shanghai and Shenzhen — referred to as northbound trade.

Trading volumes as part of Stock Connect hit new highs, with an average daily turnover value of 114.4 billion Chinese yuan ($17.6 billion) for northbound flows, up 54% from the first half of 2020.

Southbound flows had an average daily turnover value of $48.1 billion, up 132% from the same period last year, according to the earnings report.

"Our key strategic and competitive advantage is being China-anchored and connected to China," said Aguzin.

"We have a large number of our results that have some connectivity to China. We think that is great, that will continue attracting international investors," he told CNBC.

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