Hong Kong regulatory scrutiny puts share sale boom at risk

Intensifying regulatory scrutiny is rattling Hong Kong's financial industry and raising the prospects of a slowdown in booming share sales in Asia's premier fundraising hub.

- KIUYAN WONG DAVE SEBASTIAN JULIA FIORETTI

Exchange Square, which houses the Hong Kong Stock Exchange, in 2024.BLOOMBERG

In the latest blow to the industry, Beijing is restricting certain types of Chinese companies incorporated overseas from seeking listings in Hong Kong, according to people familiar with the matter. The move threatening to upend a decades-old playbook that has fuelled billions of dollars in share sales is just the latest sign that the hot market for initial public offerings is attracting a tougher stance by authorities.

Banks are now mapping out their options to deal with being under a magnifying glass, some slowing activity, according to people familiar with the matter. Bloomberg News spoke to nearly a dozen investment bankers and lawyers, who asked not to be identified discussing private deliberations.

At stake is an upswing that turned Hong Kong into the world's second-biggest venue for fundraising last year, just behind the US. The mood in the industry has turned from ebullience to caution. Some of the anxiety even reached the highest levels of global firms, the people said.

"Each bank will need to be more selective for deals they want to take," said George Wu, head of Asia-Pacific equity capital markets at law firm DLA Piper. "It will be less like a volume game."