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HKEx Sees Sharp Rise In IPOs

by Mary Swire, Lowtax.net, Hong Kong
08 August, 2014

Although Hong Kong Exchanges and Clearing's (HKEx) revenue and other income increased by only four percent year-on-year to reach HKD4.6bn (USD596m) in the first half of 2014, companies returned to the initial public offering (IPO) market to raise funds in Hong Kong.

With IPOs raising HKD82.1bn – an increase of 107 percent when compared with the first half of 2013 – Chow Chung Kong, HKEx's Chairman, pointed out that, among the 20 largest IPOs, 4 were listed on Asian exchanges and 3 were in Hong Kong.

The total market capitalization of companies listed on the Main Board and the Growth Enterprise Market was HKD23.9 trillion, and HKD217.9bn in total equity funds was raised. Eight exchange traded funds (ETFs) were newly listed during the first six months of this year, including the first Renminbi Qualified Foreign Institutional Investor (RQFII) ETF tracking the Mainland's bond market, as well as the first RQFII sector ETFs. There were 124 ETFs, 11 real estate investment trusts, and 531 debt securities listed.

The improving primary market sentiment did not provide added momentum in the Exchanges' secondary market during the six-month period. Trading in securities and derivatives markets dropped eight percent and six percent, respectively, year-on-year. This contrasted with an increase in trading on the London Metal Exchange, which benefited from revived market demand for commodities and recorded a ten percent increase in volume over the same period.

Chow confirmed that HKEx is continuing to make good progress on various initiatives under its 2013-2015 strategic plan. In particular, the impending launch of Shanghai-Hong Kong Stock Connect (SHKSC), which will allow mutual stock market access between the two cities, is one of the main strategic initiatives to be accomplished in the second half of this year, and 110 participants, or around 80 percent of the market, have submitted applications to join.

He said an SHKSC market rehearsal will be conducted from end-August to mid-September, 2014, and its official launch will take place as soon as possible thereafter. It is hoped that one of the effects of SHKSC will be to provide further impetus to HKEx's secondary market. "With this unprecedented project," Chow added, "we have turned an important new page in the further development of [Chinese] capital markets."

Finally, it was also noted HKEx has assessed the business implications of the United States Foreign Account Tax Compliance Act (FATCA) and has developed plans for the necessary operational, legal documentation, and system changes to be able to meet its implementation timeline.

Hong Kong Securities Clearing Company, Hong Kong Futures Exchange Clearing Corporation, the SEHK Options Clearing House, and OTC Clear have each registered with the US Internal Revenue Service as a "Reporting Financial Institution" under the Model 2 Intergovernmental Agreement that Hong Kong completed with the United States.

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