Hong Kong IPOs slow ahead of FINI breakthrough

FINI (Fast Interface for New Issuance) is set to improve liquidity by shortening the time from pricing to trading to two business days.

Photo by Kuang Da

Photo by Kuang Da

By ZHANG Xilong


There will only be 61 new listings on the Hong Kong market this year, down 19 percent. Total funds raised will be around HK$40 billion (36 billion yuan, US$5 billion), according to a report by Ernst & Young, down by almost two-thirds and close to a 20-year low.

Companies from the Chinese mainland continue to dominate, with well over 90 percent of new business originating there. No overseas companies are expected to list this year. Hong Kong may drop out of the global top five.

FINI breakthrough

At the end of June this year, Ernst & Young lowered its forecast for funds raised from HK$200 billion to HK$150 billion. The latest report has further reduced the estimated value by more than two-thirds.

In the context of sluggish trading and tightening liquidity, various reform measures have been introduced for the Hong Kong stock market. On November 22, the FINI platform was officially launched. FINI (Fast Interface for New Issuance) is a new digital settlement platform for IPOs by the Hong Kong Exchanges and Clearing (HKEX). Starting from November 27, the IPO subscription and settlement will follow the normal FINI schedule.

A breakthrough brought about by FINI is the improvement of market liquidity, significantly shortening the time from IPO pricing to the start of trading from five business days to two business days.

Global fundraising center

For the capital market, liquidity is a key indicator for measuring the level of trading activity and the ease of converting assets into cash. The arrival of the "T+2" era means that the waiting period after IPO pricing is effectively shortened, the accrual period is reduced to 1 day, and investors can quickly allocate funds to other trades, reducing interest expenses during the process of subscribing for new stocks.

Previously, a spokesperson for the HKEX told Jiemian News that FINI will help improve market efficiency and promote the long-term development of Hong Kong as a global fundraising center.

The lack of IPOs is also a pain point for Hong Kong stocks this year. Fundraising has decreased by 70 percent, with only one new stock raising more than HK$6 billion.

Better regulation

From a regulatory perspective, FINI is deployed on a cloud platform, and market participants and regulatory agencies can manage the process on the same platform. The method will identify suspected duplicates or multiple accounts.

In addition, this year, HKEX has added Chapter 18C, changed overseas listing rules, begun GEM reform, and lowered stamp duty.

But whether the market will rebound remains uncertain. EY's expectations are low.

Marginal improvement

TANG Zhehui, Deputy Head of Audit Services in the Central China Region of EY, said that the Hong Kong capital market will still face multiple challenges in 2024, such as global economic downturn, geopolitical issues, and the Fed raising interest rates, all of which may continue to affect Hong Kong.

ZHENG Lei, Chief Economist of Samoyed Cloud Technology Group, said that the FINI platform "is a marginal improvement in operational processes and may not be very helpful in changing the IPO downturn situation."