Equity capital markets (ECM) has been one of the best places to work in Hong Kong banking over the past 12 months. Hong Kong claimed a 15.7% market share of global initial public offering (IPO) funds in the year to end-November, more than any other market, with listings in the territory raising a total of US$31.2bn, according to Dealogic data.
That’s more than the US$29.7bn raised for the whole of 2014. And that’s certainly meant ECM bankers enjoyed a better year than their colleagues in equities sales, trading and research, whose sector suffered from savage job cuts throughout 2015.
But some analyst now expect this year to be far more challenging if you work in Hong Kong ECM. Hong Kong is expected to lose IPO market share to China, which lifted a five-month long listings freeze in November and is now introducing a “registration-based” IPO system that is tipped to “add fuel” to its market at the expense of Hong Kong, reports the South China Morning Post. Moreover, new Hong Kong listing rules which ban cash companies from listing will discourage mainland firms from seeking “back-door listings” in the city.
“The mainland’s primary securities market is likely to outperform Hong Kong’s in 2016,” Ringo Choi, the Asia-Pacific IPO leader of Ernst & Young, told the SCMP. “The new board in Shanghai, which targets Internet and other high-tech companies, may divert some IPO deals from Hong Kong’s Growth Enterprise Market.”
EY estimates that new listings in Hong Kong will fall to 110 this year from 121 in 2015. While this potentially weaker pipeline may not lead to many job cuts – ECM teams in Hong Kong are already lean – it does mean that banks are unlikely to increase their headcounts in ECM this bonus season.
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