Hong Kong vs Singapore: New economy IPOs

Singapore is making a concerted effort to attract listings by new economy companies, introducing dedicated funds that will provide late-stage funding and anchor IPOs as well as enhancing cost rebate programmes and rolling out a special purpose acquisition company (SPAC) structure.

However, the Singapore Exchange (SGX) has struggled to win favour with private equity-backed companies, with hardly anything to show for the last few years. Southeast Asian unicorns have either opted to list in their home markets or go to the US, latterly through mergers with SPACs.

“The type of companies that work in a market like Singapore will be USD 5bn or under in size, with an Asian focus and looking for international presence,” said Mohamed Nasser Ismail, global head of equity capital markets at SGX Group. “That’s where we can bring value, in helping companies access Southeast Asia out of Singapore, reach international investors, and grow at scale across Asia.”

Nasser also highlights the role of the Catalist board as a venue for smaller start-ups to raise capital, noting that the regulatory framework “allows them to raise more capital on a general mandate relative to other listing venues.” This lighter compliance burden extends into areas like M&A, with Catalist companies able to complete certain acquisitions without shareholder approval.

Other parts of the SGX pitch are not that dissimilar to Hong Kong – connecting East and West, access to international investors, strong local infrastructure, a highly educated workforce – although there is a pointed reference to operating across political divides.

Southeast Asia is also on the agenda for Hong Kong Exchanges & Clearing (HKEX), which is keen to diversify a slate of mainland China-heavy listings. The new economy focus is very visible, with HKD 893.3bn (USD 113.8bn) raised through 227 listings of this nature since reforms were introduced in 2018 permitting listings by companies with weighted voting rights structures (which effectively limited equity dilution for founders).

“Indonesian start-ups from these sectors would find several comparables already being traded actively in Hong Kong. Pricing has been fair and transparent, and capital could come from the mainland, the US, Europe, or the Middle East,” said Christina Bao, a managing director and co-head of sales and marketing at HKEX, when asked about the exchanges appeal in Southeast Asia.

More capital might soon be flowing from the mainland after the China Securities Regulatory Commission (CSRC) resolved in August to increase the number of participating companies in Stock Connect, the mechanism through which Hong Kong and mainland investors have mutual access to certain equities as well as exchange-traded funds (ETFs).

Bao believes that HKEX can serve as an international nexus for Chinese companies following the slowdown in US listings. And it won’t necessarily be mainland IPO, then Hong Kong secondary listing.

“It’s possible these companies could do an H-share or a red-chip listing in Hong Kong and then list on the A-share market. We’ve had 140 A-plus-H-share listings over the years. Electric vehicle (EV) companies, for example, are expanding outside of China, so they might consider an international listing as important in terms of brand building,” said Bao.

She added that Xpeng and Li Auto both have dual primary listings in Hong Kong and the US, with up to 30% of global trading volume emanating from Hong Kong.

HKEX has made 12 external hires at managing director level, including individuals with local, mainland and international backgrounds since June 2021, which Bao claims disproves the notion of a pandemic-related brain drain. Moreover, HKEX previously showed its ability to attract the requisite talent when preparing the ground for listings by zero-revenue biotech companies, also in 2018.

“At the time, few people in this market understood biotech. Within two years, we became number two for biotech fundraising globally after NASDAQ,” she said. “Start-ups, banks, and others recruited biotech talent into Hong Kong and the community became robust quickly.”

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• Topics
• Greater China
• Southeast Asia
• IPO
• Technology
• Hong Kong (China)
• Singapore
• China