IPO cycle to be shortened next year

Finance | Avery Chen 7 Jul 2021

Hong Kong Exchanges and Clearing (0388) will shorten the time gap between the pricing of an initial public offering and its market debut to two days from five by the fourth quarter of next year at the earliest.

The local bourse announced yesterday that it will introduce a new digital platform, Fast Interface for New Issuance, to streamline and digitalize Hong Kong's IPO settlement process.

Through FINI, brokers, sponsors, underwriters, regulators, and other concerned parties will be able to execute their roles and coordinate workflows during the IPO processes, HKEX said.

Hong Kong currently has a "T+5" settlement cycle, meaning there is a five-trading-day time gap between IPO pricing and listing.

Under the new "T+2" settlement cycle, it would significantly reduce funds temporarily frozen by an IPO by 70-80 percent, said Lukas Petrikas, managing director of HKEX's Innovation Lab.

Head of listing Bonnie Chan said the new platform will help retail investors lower risks of price fluctuation in other markets, especially those seeking secondary listings in Hong Kong.

HKEX launched a consultation about FINI last November, which initially set out proposals to reduce the settlement cycle to one day. Chan said the exchange did not rule out the possibility to adopt the "T+1" model after accumulating more experience.

The bourse also will allow some foreign new listings to adopt the longer settlement cycle to address time differences between different markets, Chan said.

She added FINI will adopt a standardized investor identification regime to deter multiple IPO applications. But she doesn't expect it will lead to a material drop in investors' interest, given high retail demand recently.

HKEX will invite market participants to join education sessions, on-boarding, market-wide testing and rehearsals to ensure a smooth transition in due course, the company added.

Meanwhile, shares of two newly listed firms little changed in the gray market before their market debut.

Mainland electric vehicle maker XPeng (9868) raised HK$13.78 billion after pricing its IPO at HK$165 apiece. Its retail tranche was oversubscribed by 13 times.

And Chaoju Eye Care (2219) raised HK$1.36 billion after pricing its IPO at HK$10.6 apiece, the top end of the initiative price range. The mainland ophthalmic medical services company attracted more than 153,000 retail investors and the portion was oversubscribed by 112 times.



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