Hong Kong stock exchange operator HKEX launches digital IPO platform FINI as listings fall to their lowest in two decades

The Hong Kong Exchanges and Clearing (HKEX) has launched a new digital initial public offering (IPO) platform on Wednesday, aiming to breathe life into the city’s ailing primary market by speeding up settlement and reducing investor risk on a stock exchange where IPO listings are in full swing Two-decade low.The “Fast Interface for New Issues” ( VERSIONS) will shorten the settlement cycle from five days to two by modernizing and digitalizing the IPO settlement process in Hong Kong.

Analysts said the new platform will speed up the listing process and increase the competitiveness of Hong Kong’s capital markets, putting Hong Kong on par with other stock exchanges. The shorter and more compact time window for offering, pricing and listing leads to lower risks for issuers and investors and makes it easier to go public even in volatile markets.

“HKEX’s FINI will significantly reduce settlement risks during the IPO process while bringing Hong Kong more in line with its global peers,” said John Lee Chen-kwok, vice chairman and co-head of Asia country coverage at UBS global banking.

Hong Kong Exchange Square in the center. Photo: Xiaomei Chen

Global macroeconomic uncertainties and high interest rates have led to a slowdown in IPOs worldwide. According to EY, a total of 61 companies have been listed in Hong Kong so far, which have raised 41.3 billion Hong Kong dollars (5.3 billion US dollars) as of November 17th. The number of deals fell 19 percent, while revenue from offerings fell 59 percent year-on-year, reaching levels last seen 20 years ago.

“We believe the launch of FINI will help generate more optimism in the Hong Kong IPO market,” said Melody Ngan, our co-head of ECM for APAC at Deutsche Bank.

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“The platform’s shorter settlement cycle and faster listing process, combined with improved sentiment, will hopefully bring fundamental investor interest back into the market,” Ngan said.

The German lender has bolstered its investment advisory team, betting that Hong Kong’s IPO market will make a comeback next year. The company has taken advantage of weak market conditions, which has allowed it to attract talent more easily.

Ivy Wong, a partner at law firm Baker McKenzie, echoed this sentiment. She said the new platform, along with the incentive of reduced stamp duty on stock market transactions, could help lift market sentiment.

“In situations with multiple large or competing offerings, particularly those characterized by severe oversubscription or significant popularity, FINI serves to mitigate blocked funds in oversubscribed IPOs,” said Edward Au, managing partner, South China region at Deloitte.

There have only been two blockbuster IPOs this year: China’s fourth-largest baijiu distillery ZJLD Group raised HK$5.3 billion, about the city’s biggest offering this year in April. It followed J&T Global Express, a Shanghai-based Asian courier company that raised HK$4.1 billion when it listed its shares in October.

Despite factors such as a weak global economy, uncertain geopolitics and interest rate hikes by the US Federal Reserve, there were nearly a hundred companies waiting in Hong Kong’s listing pipeline, analysts said.

According to Edmond Hui Yik-bun, CEO of Bright Smart Securities, one of the largest local brokers, the launch of FINI will help protect the interests of retail investors and promote participation in IPOs.

“A shorter IPO settlement time means retail investors will have to pay less margin loans for their new listing subscriptions,” Hui said.

The new financing model will also significantly reduce the amount of funds tied up in the banking sector during the IPO, which will improve the stability of the banking system, Hui added.