(Bloomberg) — Hong Kong stock exchange is set to shorten the time for an initial public offering from pricing to listing to two days from the current five by the fourth quarter next year at the earliest, aligning its market more with other financial hubs.
Through a digital platform called “FINI,” brokers, underwriters and regulators and other involved parties will be able to monitor and coordinate work flow of the whole process to the start of trading, according to a Hong Kong Exchanges & Clearing Ltd. statement on Tuesday.
The exchange had initially aimed for just one settlement day. The push for speedier IPOs has met a tepid reception from the city’s brokerages who can make money by lending to investors during the period. For investors, it could give them more leeway to subscribe to more IPOs that are pricing around the same time.
The move will drive market efficiency and reinforce “Hong Kong’s position as the world’s premier IPO market,” HKEX’s Chief Executive Officer Nicolas Aguzin said in the statement.
Hong Kong has seen HK$30.32 billion ($3.9 billion) raised through IPOs so far this year. But the long settlement cycle has often dried up liquidity in the local money market, pushing up short-term interest rates and adding risks for the city’s currency peg with dollar.
Hong Kong Looks to Speed Up IPO Process to Reduce Risks (1)
The new platform would help to solve another local problem where retail investors have placed duplicate orders through different brokers to have a better chance of getting shares in popular IPOs, a practice that has been banned by local securities rules but has yet to be eradicated over the years.
FINI will help make the public offering subscription “a fairer process,” HKEX’s Head of Listing Bonnie Chan said on a call with reporters.
“I personally don’t think that this will lead to a significant drop, or material drop, in terms of interest,” she said. Some recent popular IPOs were thousand times over-subscribed, she said, clarifying that she in no way suggested such demand was fueled by multiple orders.
The bourse also announced that starting Monday all companies seeking to sell shares on the Asian bourse must do it entirely electronically.
(Updates with comments from exchange in seventh paragraph.)
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