The Hong Kong Exchanges and Clearing is set to face even more headwinds, in addition to a Chinese regulatory crackdown, with the latest blacklisting of artificial intelligence firm SenseTime for its alleged enablement of human rights abuses against Muslim Uighurs in Xinjiang.

Last week, the U.S. Treasury placed SenseTime on the blacklist for human rights abuse against Xinjiang’s Muslim Uighurs which derailed the facial recognition technology firm’s listing plans in Hong Kong. 

After a «Financial Times» report of the expected blacklisting on Thursday, SenseTime did not proceed with the planned pricing of its shares in Hong Kong on Friday.

In addition to denying the claims, calling them «unfounded» and reflective of a «fundamental misperception» of SenseTime, the firm will now delay its Hong Kong IPO which was scheduled for December 17, according to multiple media reports.

SenseTime IPO

SenseTime’s original plan was to raise as much as $767 million as it sought a valuation of up to $17 billion. 

According to a preliminary prospectus, eight cornerstone investors have committed to subscribe for $450 million in SenseTime shares – 59 percent of the offering – including $200 million for state-owned Mixed-Ownership Reform Fund.

Next Steps

Meanwhile, banks will have to reportedly make adjustments and address regulatory concerns including an updated prospectus detailing the risk of SenseTime’s latest addition into Washington’s blacklist. 

According to a «Bloomberg» report today, SenseTime is working with advisors to make the changes and will look to proceed with its Hong Kong listing, although a separate «Reuters» report claims that plans to withdraw the IPO are underway.

Should SenseTime fail to list by April, Japan's SoftBank has agreed in the most recent funding round to buy back the shares from investors, according to another «Bloomberg» report last week citing unnamed sources.

HKEX Hit

The latest move by Washington adds further headwinds for the Hong Kong Exchanges and Clearing (HKEX) which could register its first drop in annual IPO proceeds since 2017 as it already faces ongoing challenges from China’s regulatory crackdown on the tech sector.

According to a recent forecast by KPMG, HKEX will raise an estimated $39 billion from 110 IPOs by year-end, down 23 percent compared to 2020.

This will place HKEX as the fourth-ranked venue for IPOs worldwide, behind Nasdaq, New York Stock Exchange and Shanghai Stock Exchange.