Hong Kong's 'IPO Connect' plan to boost market liquidity and China asset access

Hong Kong is seizing every opportunity to consolidate its role as a global financial centre, leveraging unique advantages and national strategies. This piece, the second in a miniseries focusing on the city’s financial industry ahead of the handover anniversary, explores the likelihood of an “IPO Connect” that could inject much-needed liquidity into the market and deepen international investors’ access to top-tier China assets.

At every summer’s Lujiazui Forum, attended by China’s top financial regulatory officials, policy announcements are closely watched by Wall Street banks eager for deeper penetration into the Chinese market.

At last week’s edition, Hong Kong secured approval to launch long-awaited yuan Treasury bond futures in August, while Shanghai reaped a wide range of benefits, including offshore bond sales and forex trading in its pilot free-trade zone.

Global investors, however, want more opening under closer collaboration between the two cities. One of them – a decade after the milestone Stock Connect allowed foreign investors to buy mainland Chinese stocks through Hong Kong and vice versa – is to expand the connect programme further to initial public offerings (IPOs).

An “IPO Connect” would be a “good step towards further integrating the Hong Kong and Shanghai complex”, said Gokul Laroia, Asia CEO and co-head of global equities at Morgan Stanley, at a panel of the Lujiazui Forum on June 17.