Hong Kong to quicken IPO vetting process to boost city’s allure as fundraising venue

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New time frame for processing IPO applications will add clarity and transparency, and potentially save costs for candidates, experts say

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A post-stimulus bull run in Chinese stocks will allow IPO candidates to fetch higher valuations for their shares. Photo: Bloomberg

Enoch Yiu

Published: 7:55pm, 18 Oct 2024Updated: 9:44pm, 18 Oct 2024

Hong Kong’s stock market authorities have pledged to accelerate the listing approval process for new qualified candidates and existing mainland-listed companies, a move aimed at enhancing the city’s ranking as a global fundraising venue after a recent rebound in activity and sentiment.

The Securities and Futures Commission (SFC) and bourse operator Hong Kong Exchanges and Clearing (HKEX) pledged to assess new initial public offering (IPO) submissions and raise any regulatory or suitability concerns within 40 business days, according to a joint statement on Friday. The candidates and their sponsors and advisers may take 60 business days to address those concerns, it added.

“Subject to obtaining approvals from the Listing Committee and other authorities or regulators, the application process would be completed within the six-month application validity window,” it said.

People walk past screens displaying the Hang Seng Index and stock prices outside the Exchange Square in Central in January 2024. Photo: Reuters

The new time frame adds clarity and transparency to Hong Kong’s IPO process, which can take anywhere from several months to years because of duplication and communications issues. Companies raised US$7.14 billion through IPOs this year through September 30, making Hong Kong the fifth busiest venue worldwide. It topped the global IPO league table seven times between 2009 and 2019.

A more than 20 per cent surge in Chinese stocks at home and abroad since Beijing’s massive stimulus announcement on September 24 has also fattened valuations, allowing companies to fetch higher prices for their new shares.

“The move is certainly positive because it gives a clearer timeline for companies that want to apply to list in Hong Kong,” said John Lee Chen-kwok, vice-chairman and head of Greater China global banking at UBS. “This will enhance the competitiveness of the Hong Kong IPO market versus other overseas exchanges.”

The SFC and HKEX have also given themselves a 30-business-day time frame to evaluate IPO applications from Shanghai- and Shenzhen-listed companies with at least HK$10 billion (US$1.28 billion) of market capitalisation if all the papers and disclosures are in order.