"Currently the HK IPO pipeline is ridiculously vibrant." "Some Chinese companies that operate in sensitive sectors might be thinking of listing in Hong Kong instead of the US," said Haitong International equity capital markets managing director Kenneth Ho. If IPOs of Chinese unicorns grind to a halt, the Hong Kong exchange should still be boosted by secondary listings and the conversion of American depository receipts, according to Bloomberg Intelligence analyst Sharnie Wong. Hong Kong looks well placed to benefit from the geopolitical and regulatory frictions, though dealmaking in the financial hub may also become entangled in the regulatory push. The Cyberspace Administration of China said on Saturday that its proposed review would address risks for data to be "affected, controlled, and maliciously exploited by foreign governments". The China Securities Regulatory Commission is now leading efforts to revise overseas listings rules that would require VIE firms, which do business in China but are registered in places like the Cayman Islands, to seek approval before selling shares overseas, Bloomberg has reported. For two decades, China's technology giants have sidestepped restrictions, using the so-called Variable Interest Entity (VIE) model to attract foreign capital and IPO offshore. So far this month, the Nasdaq Golden Dragon Index - which tracks some of the biggest Chinese firms listed in the US - has shed some US$145 billion in value.Īt the heart of the recent crackdown is how far regulators will go to check foreign investment in sensitive industries, particularly those controlling vast amounts of data.
Valuations for China's technology firms, which were already falling before the recent onslaught, now look shakier as investors signal they will demand steeper discounts to buy shares, said one banker, asking not to be named discussing internal business.
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