Alibaba’s Hong Kong IPO, which is slated for November 26, will provide a much-needed boost to the city’s status as a global financial hub, and to the moribund local job market in investment banking.
The listing, which is expected to raise around US$13bn, is a rare positive development for bankers in Hong Kong, whose city has been ravaged by civil unrest, which has plunged the economy into recession and soured investor sentiment. The Alibaba IPO is the biggest listing of 2020 globally and will help Hong Kong leapfrog the Nasdaq and New York exchanges to become the world’s top fundraising market this year. It follows an overhaul of Hong Kong’s listing rules, enabling Alibaba to dual list.
Perhaps more importantly, if you work in equity capital markets (ECM) and want to keep your job, Alibaba’s decision to list in Hong Kong may have positive long-term consequences. “It could encourage more Chinese technology companies to list in Hong Kong,” says Stanley Soh, a Hong Kong-based director of Asian financial services solutions. “This could further grow the Stock Connect cross-border investment channel, which allows Chinese investors to invest in Hong Kong-listed stocks,” he adds.
Next year could be a boon year for ECM bankers, with several high-profile Chinese tech companies, including ByteDance and Ant Financial, potentially looking to float in Hong Kong, in defiance of the city’s ongoing political crisis. Megvii, the Chinese facial recognition company, is this week reportedly planning to seek approval for an IPO in Hong Kong after a US listing was rejected by American authorities.
“A healthy IPO pipeline is anticipated next year and will continue to show Hong Kong's resilience as one of the best venues for listings globally,” says Gin Sun, a director at Michael Page. Moreover, if the Trump Administration carries out reported proposals to restrict the flow of US capital to China, including delisting Chinese firms from US stock exchanges, Hong Kong could be a “major beneficiary”, she adds.
Hong Kong’s encouraging IPO pipeline should ensure that bankers at large firms are kept busy in the coming months. CICC and Credit Suisse are the joint sponsors and joint global coordinators for the Alibaba offering, while Citi, JP Morgan and Morgan Stanley are also acting as joint global coordinators, for example. It will also trigger a minor increase in demand for bankers in Hong Kong. “There should be a pickup in hiring specialist industry bankers, particularly in healthcare and technology, to originate more industry-related IPOs in Hong Kong,” says Soh.
In contrast, banks in Hong Kong are not yet adding generalist ECM bankers and are keeping their ECM headcounts steady, says Sid Sibal, a director of financial services at recruiters Hudson in Hong Kong. Abimanu Jeyakumar, head of Selby Jennings in Hong Kong, describes the ECM job market as “slow” right now, but adds that more ECM bankers will be hired in the coming months, if the expected influx of new listings eventuates.
Image credit: maybefalse, Getty
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