“CATL’s Hong Kong listing is a significant milestone, not just for the company but for the broader regional market,” said Joshua Chu, a Hong Kong-based lawyer at CITD.

“The scale of the IPO, given the current global macroeconomic headwinds and the cautious investor sentiment in Asia, is impressive,” he added.

The advisers also managed a complex dual-listing process, underscoring Hong Kong’s growing capability to handle large strategic offerings. After all, these were some of the most seasoned global and regional financial institutions and law offices, according to Anandaday Misshra, managing partner of Indian law firm AMLEGALS.

“It is clear that CATL has leaned on deep institutional and sectoral expertise to structure a deal of this magnitude,” Misshra added.

Also, CATL’s Hong Kong listing “shows growing confidence in zero-carbon technologies and the companies building them,” Kapil Dhiman of Quranium said.

“As a company building secure digital infrastructure for the future, we see this as a sign that Hong Kong is ready to play a leading role again in supporting bold, forward-looking industries,” Dhiman adds.

CATL reported a 40% year-on-year increase in EV battery deliveries in the first quarter of the year. Seoul-based SNE Research suggests it also acquired a 38.2% global market share.

CATL’s Hong Kong listing proceeds would be utilized for factory construction in foreign markets—accounting for 30% of its total revenue.

“For now, it looks far more like a war chest. The large earning to spending suggests China will take up any new technologies slowly anyway,” said economist Dr. Bryane Michael of Oxford University.

CATL’s IPO also reflects a broader shift in global capital flows.

“As US-China trade tensions ease, Chinese equities have rebounded strongly, while ongoing US-EU tariff disputes and political uncertainties continue to weigh on US markets,” Chu said. “Hong Kong’s mature market infrastructure and strategic positioning make it an increasingly attractive destination for international investors seeking stability and growth in Asia.”

Participating fund managers may be compelled to sell some of their US government bonds due to Washington’s loss of its triple-A rating. Specifically, the MPFA told managers and MPF trustees to prepare for the possibility that the remaining credit agencies may slash US government debt ratings. The regulator asked trustees to devise adequate strategies and risk mitigation methods should US bond ratings fall further, as the MPFA has no plans to alter existing investment requirements.

The responsibility lies with MPF investment managers to create sound compliance plans, the regulator emphasized—and to make prompt, coherent changes to their asset allocation when responding to market events, while at all times acting in the best interests of MPF scheme members

Moody’s mid-May decision to downgrade US sovereign debt stemmed from the growing cost of rolling over existing debt amid high interest rates alongside the steep rise in the federal government’s budget deficit. The one-notch downgrade reflected a decade’s growth in interest payment ratios and government debt to levels markedly greater than similarly rated sovereigns, Moody’s said in a statement.

Also, as of late May, Moody’s and S&P Global maintained their respective Aa3 and AA+ credit ratings for Hong Kong. Both agencies said the special administrative region’s position was largely secure on the back of its sizable foreign exchange reserves and fiscal buffers, coupled with high per capita income levels and the territory’s robust external balance sheet.

Under the just-announced joint consultation mechanism, when an SME faces sudden, unexpected liquidity woes, it can directly contact its lender bank for relief. After obtaining the client’s authorization, the lending institution can contact other banks to discuss financial arrangements to reduce the pressure on the SME’s liquidity. The bank can then address the situation quickly and smoothly, focusing on reducing the SME’s cash-crunch worries. SMEs represent 98% of Hong Kong’s businesses, employing 45% of its private-sector workforce, according to government data.

In October, 16 major Hong Kong banks said they would provide 370 billion Hong Kong dollars ($47 billion) in their loan portfolios for SMEs. The Hong Kong Monetary Authority—the special administrative region’s de facto central bank and regulator—slashed its countercyclical capital buffer ratio to release another HK$300 billion to HK$400 billion in liquidity to facilitate more lending to SMEs.

Businesses that previously borrowed funds under the government-backed loan plan can apply for a principal repayment grace period of up to a year. Additionally, SMEs that borrowed from banks on the open market—outside the government program—can apply to renew their partial principal repayment options. The 18 banks on board are HSBC Holdings, Hang Seng Bank (owned by HSBC), Citibank (Hong Kong), Standard Chartered Bank, Industrial and Commercial Bank of China, Bank of China, Bank of Communications (Hong Kong), Bank of East Asia, China CITIC Bank International, China Construction Bank (Asia), Dah Sing Bank, DBS Bank, Fubon Bank, Fulong Bank (Hong Kong), Nanyang Commercial Bank, OCBC Bank (Hong Kong), Shanghai Commercial Bank, and PAO Bank.          

Christopher Hui, the territory’s secretary for financial services and the treasury, said at a recent conference in Shenzhen that the bourse pledged to ease listing requirements for Chinese firms. The mainland regards the Special Administrative Region’s (SAR) capital markets as a valuable source of funding in realizing their wider global expansion goals.

Observers expect local markets watchdog and HKEX to propose amendments by the end of the year. Regulators conducting comprehensive studies are expected to showcase proposed measures to better the current fundraising system, Hui said at a meeting of the Shenzhen-Hong Kong Financial Cooperation Committee in mid-February.

Hong Kong’s IPO market is still shaking off a multi-year slump as more mainland Chinese-listed firms seek dual listings on the SEHK.

Mainland firms are keen to learn the degree to which the territory’s regulators will streamline application procedures and lower listing requirements. HKEX figures indicate that, in January, the exchange received 30 IPO applications in January, including seven A+H applications for firms already possessing mainland-listed (A) shares that wanted to add Hong Kong (H) shares, or H shares.

According to Bonnie Chan, HKEX’s CEO, nearly 100 companies were in the city’s IPO pipeline as of January.

In February, electric vehicle battery maker Contemporary Amperex Technology (CATL) submitted listing documents to HKEX. The Ningde-based company will likely raise $5 billion—potentially the SAR’s biggest IPO in more than four years. Proceeds from the proposed IPO will help enhance mainland EV supply chain dominance.

In recent years, Hong Kong regulators have emphasized the importance of closer links between capital markets to uplift the mainland economy. They also stressed the SAR’s role as a bridge between mainland Chinese and global markets, while promising to create more cross-border investment mechanisms to facilitate increased capital flows. CATL, the world’s largest producer of batteries for electric vehicles, said proceeds from the proposed IPO would reinforce its global expansion, which would enhance China’s dominance in the EV supply chain.

Banks seeking to use GenAI in their products should follow a range of principles—including ensuring that clients can opt out of using the technology and that AI models do not disadvantage or lead to an unfair bias toward certain client groups.

Although suggestions presented in 2019 in a set of principles for institutions using AI still broadly apply, HKMA is pushing for further measures to address risks particular to GenAI, which could potentially have an “even more significant impact on customers,” the banking watchdog said. The guidelines arrive against a backdrop of HKMA noting growing interest in GenAI from the city’s banks. Locally, 39% of the authorized institutions the regulator surveyed are already using GenAI or are planning to use it.

Yet, the use of AI by Hong Kong banks, popularized by OpenAI’s ChatGPT, is still in its nascent stages, the regulator said, adding that most firms currently use “off the shelf” third-party solutions for business functions such as internal chatbots, coding, translation and summarization. In time, use-cases could expand to include robo-advisers and customer-facing chatbots in private banking, wealth management and insurance, HKMA said.

In mid-August, HKMA launched a GenAI sandbox with the government-funded incubator tech hub Cyberport. The aim is to let financial institutions pilot use-cases within a risk-managed framework and with technical assistance. Details of the sandbox’s application process are pending.

Although regulators try to keep pace with technological development by issuing nonbinding guidelines, the territory lacks GenAI rules and regulations. In June, the Office of the Privacy Commissioner for Personal Data, Hong Kong’s privacy regulator, issued its first personal-data protection guidelines for firms using GenAI services. The privacy regulator urged companies to establish internal AI governance committees that directly report to their boards.

The aim is to boost secondary markets and slow the rate of fresh fundraisings. Such regulatory action, like seizing mobile phones and laptops belonging to senior executives, has caused more companies to withdraw IPO applications.

The CSRC announced in April that it would conduct onsite inspections on 20% of initial public offering hopefuls in 2024—four times greater than its target last year. The watchdog, which tightened rules in March, reportedly wants to ensure that only top-tier firms (those preferred by the Beijing government) can access the country’s capital markets.

The nation’s largest bourses in Shenzhen and Shanghai haven’t accepted any IPO applications this year.

Over 130 Chinese IPO candidates scuttled their listing plans in 2024, data shows. Swiss agro giant Syngenta, for example, aborted a $9 billion offering in Shanghai.

China’s domestic benchmark figure rose 7% this year, but total funds from IPOs plummeted by almost 90% to $2.6 billion in the first four months. That’s the lowest level since 2013. 

CSRC and local stock exchange officials now show up at IPO applicants’ offices insisting to review their business and personal documents to gauge their financial heath and governance.

Similarly, underwriters for prospective IPOs must be present and be prepared to be questioned by regulators and bourses alike. Yet, this raises the risk that banks and brokerages will become ensnared in their clients’ regulatory problems. In some cases, bankers have needed to surrender their computers and mobile devices—lest they be left out of an IPO or even lose their jobs.

In February, the CSRC fined Shanghai semiconductor firm S2C for fraud in its listing application, despite the company cancelling its intended IPO in July 2022.

Such measures to rein in IPOs have dampened prospects for investment banks and professional services firms. China’s equity-related underwriting fees dropped 77% to $301 million last quarter from a year earlier—the lowest level since 2009.

Clement Cheung, CEO of Hong Kong’s Insurance Authority (IA), has emphasized the necessity of creating the right ecosystem for this endeavor. The city is witnessing increased engagement with issuers and investors, especially in China’s Greater Bay Area, alongside efforts to enhance talent and risk modeling capabilities in local universities.

A key challenge in natural-catastrophe insurance coverage is the scarcity of data, hindering risk assessment and underwriting. Hong Kong, considered a global financial center, has the potential to attract transnational entities and international insurers to issue ILS instruments. Notably, the World Bank listed $350 million in catastrophe bonds in Hong Kong in 2023, securing Chile against earthquake-related financial risks.

Catastrophe bonds transfer extreme weather risk to capital markets, expanding insurers’ capacity to underwrite higher risk. With global cat bond issuance reaching a record $15 billion in 2023, advocates tout ILS as a valuable tool for disaster risk management, offering investors asset diversification unaffected by interest rates and capital market fluctuations.

Despite efforts to grow the market, Hong Kong has seen limited success with only a few issuances, primarily for Chinese perils. In contrast, Singapore attracted high-quality issuers like Japanese carriers Tokio Marine and MS&AD—according to Mithun Varkey, editor in chief of Insurance Asia News—highlighting the competition between the two financial hubs.

Asia-Pacific and Africa remain highly vulnerable regions, with minimal insurance coverage for natural-disaster losses. While Hong Kong’s government has shown support for ILS development through regulatory measures and grant schemes, challenges persist, including investor awareness and market depth.

Hong Kong’s IA is engaging with potential issuers, including insurers, reinsurers, and Chinese municipalities, to expand the market. However, Varkey says Chinese insurers remain hesitant due to perceived higher costs compared to traditional fundraising methods. In contrast, Singapore has made strides in ILS, offering cybersecurity cat bonds and renewing grant schemes for longevity and mortality coverage. The competition between Hong Kong and Singapore underscores the importance of fostering a conducive environment and addressing market challenges to realize the potential of ILS in the region.        

Already, the overseas arm of mainland Chinese fund house Bosera Asset Management and Hong Kong-based virtual asset firm HashKey Capital have received “conditional approval” from the city’s Securities and Futures Commission (SFC) to jointly launch spot crypto ETFs, both firms announced in mid-April.

Chinese fund managers Harvest International and China Asset Management Company (ChinaAMC) are also expected to receive approvals from the city’s capital markets watchdog, Caixin has reported. ChinaAMC announced it is working on crypto ETF products after it received SFC approval to provide virtual asset management services.

Hong Kong crypto ETFs will not be available to mainland investors, however.

“This self-imposed limitation may unnecessarily constrain Hong Kong’s ETF competitive edge from its full potential,” says Joshua Chu, a crypto and fintech lawyer in the city.

The SFC initially published rules permitting spot crypto ETFs, including spot ether ETFs, in December, making the Chinese Special Administrative Region (SAR) the first Asian jurisdiction and the first international financial center to approve such a product. Conversely, the US Securities and Exchange Commission, which approved spot bitcoin ETFs in January, has persistently delayed deciding on ETFs that directly invest in ether, the native token of the Ethereum blockchain. A decision is expected late this month.

There is pressure for the SEC to hurry up. Since January, bitcoin ETFs have seen more than $200 billion in trading volume, according to crypto news and data outlet The Block.

Hong Kong’s securities regulator has not made any announcement on ETFs, as none have yet been officially approved. Provisional approvals enable market entrants to prepare to offer such funds, however, such as applying to Hong Kong Exchanges and Clearing (HKEX) to offer them on the city bourse. Spot crypto ETFs can benefit investors seeking exposure to virtual assets without creating blockchain wallets or attending to other cumbersome details. ETFs also have mainstream appeal, since they can be included in retirement funds.          

In the first quarter of 2024, dealmakers executed $4 billion worth of take-private transactions involving companies on the territory’s bourse. That’s up from $1.2 billion for all of 2023, according to Dealogic data.

The trend does not bode well for the Hong Kong Special Administrative Region (SAR). The market-capitalization benchmark Hang Seng Index fell 14% in 2023.

“On one end, lower valuations would encourage current holders and managers bargains,” says Bryane Michael, an economist and senior fellow at the University of Hong Kong’s Faculty of Law. “On the other end, one might see a socialist government taking more securities out of private hands [especially potentially foreign ones]. Deleveraging probably represents the middle, and most likely ground.”

Stricter listing regulations also led to record expulsions. The SEHK delisted 47 companies from its main board in 2023; 13 withdrew voluntarily. This follows 52 delistings in 2022, of which 37 were booted off.

Companies are believed to be leaving the city’s SAR’s stock market—either through voluntary delisting or privatization—because current valuations are deemed too low. In mid-March, for example, truck-manufacturer CIMC Vehicles offered HK$1.1 billion (approximately $140 million) to buy back all its listed shares not held by its major shareholder and delist from the exchange.

For CIMC, the low liquidity and cheap valuation created difficulty for the company to effectively conduct fundraising exercises on the Hong Kong stock exchange, the company said in a filing to HKEX.

Chinese sportswear maker Li Ning plans to take the company private after a 70% decline in its share price in 2023. Local media also reported that French skincare company L’Occitane consulted investors and advisers about going private.

According to Bloomberg, the Hang Seng Index traded at about 9.1 times forward earnings on average while the CSI 300 Index, which tracks major companies on the Shanghai and Shenzhen exchanges, traded with price-to-earnings ratios of 13.4. Meanwhile, members of the US S&P 500 Index traded at an average ratio of 23.2.

“These sudden shifts represent no sudden shock,” says Bryane Michael, a UK-based economic consultant and analyst. “Behind them lie structural problems waiting for almost a decade to materialize.” Since the early 2010s, “China’s subsidized industrial favorites have continued to rely on an export-led, quasi-autarkic relationship with partners. Together with a shadow economy consisting of easily a quarter of the overall economy, these represent some reasons for the Chinese economic motor’s seeming ‘sudden brake.’”

Michael sees “long-run state planning” as the culprit, with “the same consequences we have seen from India to Guyana. The collapse wasn’t a matter of ‘if’ but ‘when.’”

China’s unpredictable business environment, in tandem with crackdowns on foreign-based consultancies and tightened espionage laws, have heightened risks for international firms. Consulting firms like the Mintz Group and Bain used to provide critical insight for foreign firms to make informed investment decisions. Concerns are that China’s updated counterespionage law could reframe mundane business activities as national security risks.

Hong Kong, where many foreign corporations have their regional headquarters, last month enacted its own national security law under its mini-constitution as a Special Administrative Region. The new legislation—expanding the definition of “state secrets” and criminalizing information sharing about technological and economic developments—could have a chilling effect.

Geopolitical tensions between Beijing and the West—particularly the US—are also raising costs and uncertainty for businesses still operating in China. Both American and EU sanctions, export controls, and outbound investment restrictions directed at China may already be dissuading some from doing business there. Additionally, the push by Washington and its allies to lessen their reliance on Chinese manufactured goods and raw materials has prompted some producers to relocate to Southeast Asia and Latin America. This, coupled with Washington’s and Brussels’ efforts to rebuild their domestic industrial capacities and supply chains, promises to redirect investment that might otherwise have gone to China closer to home, or to “friendshore” it to allied nations.