atans1

HKEx: Plan B when Shanghai overtakes it

In Uncategorized on 11/03/2010 at 5:48 am

Sounds (see below) bit like SGX’s strategy of playing second fiddle (although perish the tot of SGX admitting that it is  pursuing second tier status).

And it doesn’t need a Plan B, yet. Note that Prudential said that has made its application to the exchange for an introduction and said it would not offer any new ordinary shares. It had previous said it would apply for a dual listing after it stakeover of AIA. French cosmetics group L’Occitane is getting ready for an IPO in Hong Kong next month in a move that highlights rising consumer demand in Asia for luxury goods. It  could raise up to US$700m to bankroll its Asian expansion plans.And FT reports further, “A successful listing could re-ignite interest among other European luxury goods companies, including Prada and Ferragamo, which abandoned Hong Kong IPO plans ahead of the global downturn.”

Contrast this with SGX. It has now only started marketing to the Ruskies. Let’s hope some decent R-Chips come our way.Thinking of S-Chips: Sino-E and friends, I have my doubts.

From Reuters Breakingviews:

The Hong Kong Stock Exchange is the world’s second-biggest by market capitalization. Call it the China factor. Yet as the mainland’s own exchanges get bigger, Hong Kong can’t count on winning prize listings forever. It’s time for a Plan B.

Hong Kong has long been the destination for public offerings of China’s state-owned companies, because mainland rivals were deemed too small. But now, China wants to develop an international financial center on the mainland. Even Hong Kong stalwarts, like the lenders HSBC and Standard Chartered, plan to issue shares over the border. The next big bank to list, Agricultural Bank of China, may eschew Hong Kong altogether.

Hong Kong can’t get away from its Chinese roots. Efforts at diversification from Chinese public offerings have had little success. In 2009, mainland enterprises still accounted for more than 82 percent of all public offering money raised. The failure of the American International Group’s Asian life insurer, A.I.A., to go through with a planned listing may cut Hong Kong’s pipeline in half.

Charles Li, the exchange’s new chief executive — and a mainlander — says the exchange seeks to position itself against competition from London, New York and Shanghai by doing things that others can’t do. One way would be to focus less on initial public offerings and more on other businesses, like derivatives. As China’s own capital market deepens, the need for more sophisticated products will increase.

The real gold mine, though, could be for Hong Kong to focus on becoming China’s offshore renminbi capital. China is keen to push the renminbi internationalization agenda, but progress has been slow, mainly because of a lack of products for investment. Trading renminbi bonds offshore could be a good start. Stocks priced in renminbi could follow.

Hong Kong would need Beijing’s approval, and might have to accept a future without blockbuster public offerings. But better a partner than a rival.

ROB COX and WEI GU

Earlier posting on Shanghai’s ambitions http://atans1.wordpress.com/2010/03/01/spore-hk-have-competition/

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