Chinese companies reconsider IPOs, Hong Kong faces threat

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Several Chinese companies are rethinking fund-raising plans in Hong Kong as protests continues, reported  Straits Times.

The city’s benchmark Hang Seng Index has tumbled 12% over the past three weeks as protests grew violent, raising fears that the Chinese military may intervene to restore order. The S&P 500 Index fell about 5% during the same period.

The stakes could hardly be higher for Hong Kong, whose economy is highly dependent on the financial industry. Chinese companies accounted for US$9 billion of the US$11 billion raised via IPOs in the former British colony this year, as well as about 80% of bond sales in the city, data compiled by Bloomberg show. Outstanding China-related loans by Hong Kong banks totalled more than US$560 billion at the end of the first quarter, according to the Hong Kong Monetary Authority.

However, few expect China Inc to abandon Hong Kong’s financial system en masse. US markets are seen as a more stable, but their appeal to Chinese issuers has also diminished somewhat in recent months as the trade war soured relations between the two countries.

According to the report, the city “faces competition from international hubs like the US and Singapore, but it is also increasingly vying against financial centres in mainland China.”

“A gradual loosening of restrictions on foreign investment has turned Shanghai and Shenzhen into feasible options for Chinese firms who want access to overseas funds,” it said.

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Written by

Cheryl Toh

Last updated on

August 16th 2019, 11:20 am

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