Hong Kong's stock exchange is allegedly verifying that China applicants comply with the mainland’s rules, with some dropping plans to list.

The white-knuckled arbitraging of the world’s major stock exchanges in the age of rising U.S.-Chinese tensions seemed, until very recently, to guarantee Hong Kong a never-ending pipeline of Initial Public Offerings (IPOs). But indications are becoming increasingly clear that may no longer be the case.

A «Bloomberg» report earlier this week, citing people familiar with the matter, claimed that Tencent-owned We Doctor, ostensibly planning a $3-billion IPO in the city, had been fielding questions about whether its data management complied with China rules.

IPO on Hold

The daily «South China Morning Post» echoed some of the same sentiment. According to the newspaper, quoting unidentified sources, NetEase streaming subsidiary Cloud Village has put its $1 billion IPO on hold, although that move seemed to be more due to unfavorable market conditions.

The truth is that there is no boom in Hong Kong shares or IPO listings right now. If anything, the trend points the opposite way. The Hang Seng has felt the brunt of China’s crackdown on technology and internet shares, and the main index is significantly off February’s highs.

More Than 80 Percent Below Highs

Nothing better exemplifies this than Kuaishou, one of China’s leading video sharing apps, which was listed earlier this year. It now trades around HK$81.55 ($10.48), more than 80 percent below the high it reached after its IPO – and despite not even being directly affected by the regulatory crackdown on the mainland.

Events in China show no sign of letting up either. After harsh criticism of online gaming was walked back recently, it now seems the sights are set on insurers.

HKEX Sees Differently

But, in all this, the Hong Kong Exchange begs to differ. It apparently does not see many problems ahead. In its interim 2021 results presentation earlier this week, they indicated seeing continued conversions of American Depositary Receipts (ADRs) and migration of secondary listings.

They also pointed out Kuaishou as one of the top three IPOs since January 2018, which seems a bit off-putting to say the least.

Selling Consumer Franchises

The foreign banks in the city seem to be on the exchange’s side. According to certain Swiss media outlets and «Reuters» earlier this year, banks such as UBS may be hiring in the city again.

A direct call to a UBS spokesperson brought out the well-trod ‹no comment› but other sources did indicate to finews.asia that much of the hiring is likely to be with other American and European institutions, such as J.P. Morgan and BNP Paribas.

Goldman Sachs told «Reuters» it expected staff levels to rise 20 percent this year. Citigroup was also mentioned in the report, although any hiring here is unlikely to be solely for IPOs. The bank said during its first-quarter results that it is selling consumer franchises around the world, including in Asia, while focusing on four regional wealth centers, of which Hong Kong is one.

No Free Ride

But, still, what is getting forgotten in all this is that Chinese companies aren’t going to have a free ride if they do list. For one, mainland regulators are not that far away. The listing process itself is not easy, particularly if the exchange is going to uphold its stated claim that it is transparent and adheres to international standards of corporate governance.

And you can certainly see which applications have been approved or returned at any time. In that, it should be noted that the size of the prospectuses for active applicants in August alone ran between 450 to 648 pages for each potential issuer. That does not much sound like any kind of cakewalk for anyone – anywhere.