In a bid to overhaul the system and aligning its market with other financial hubs, Hong Kong’s stock exchange is looking at shortening the time for an Initial Public Offering (IPO).
In a bid to overhaul the system and align its market with other financial hubs, Hong Kong’s stock exchange is looking at shortening the time for an initial public offering (IPO).
While earlier investors had to wait for a week for a newly priced stock to start trading, the timing from pricing to listing is now being proposed to be reduced to two days.
Stock market operator Hong Kong Exchanges & Clearing Ltd on Tuesday said that brokers, underwriters, regulators, and other involved parties will be able to monitor and coordinate the workflow of the whole process to the start of trading through a digital platform called “FINI”.
Initially, the exchange had intended for a single settlement day and this push for faster IPOs was met with a lukewarm reception from the city’s brokerages that can make money by lending to investors during the period. Investors, on the other hand, could get more flexibility to subscribe to more IPOs that are being priced at the same time.
In the US, trading in stocks begins a day after an IPO is priced. Prolonged delays carry a risk of external events impacting the trading trajectory of the stock and souring of the market sentiment.
Hong Kong Exchanges & Clearing Ltd put forth the proposals on July 6 following a consultation. The proposed changes are expected to take effect in the fourth quarter of 2022, to help Hong Kong stay competitive as a listing venue.
Hong Kong has witnessed a boom in terms of stock issuance following a bout of big Chinese IPOs along with a series of secondary listings of Chinese tech companies which already are listed in the US.
As per Refinitiv data, Hong Kong saw first-time public stock sales worth $28 billion, which also includes secondary deals, in the first half of 2021. It is now the third-major listing venue following Nasdaq and the New York Stock Exchange.