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Western banks have been the biggest beneficiaries of Hong Kong equity sales this year, shrugging off US-China tensions as dealmaking booms in Asia’s financial hub.
Morgan Stanley helped raise $11.6bn in equity offerings in the year to the end of November, according to data compiled by Bloomberg. Goldman Sachs was in second position after raising $7.4bn, followed by Chinese banks Citic and CICC and Switzerland’s UBS.
The data includes both initial public offerings and follow-on share sales by companies already listed in the territory, including a $4.6bn share sale by the world’s largest battery maker CATL and the IPO of mining company Zijin Gold.
Hong Kong’s capital markets have been revived by a wave of Chinese companies raising billions of dollars in the city, which is on track for a four-year high in IPO fundraising. Foreign investors are showing renewed interest in Chinese equities after years of shunning the market.
“For huge deals you still need these global brands,” said Alicia García Herrero, chief Asia-Pacific economist at Natixis. “The reason why they still need Goldman or Morgan Stanley is they want to attract foreign investment, especially into the big deals like BYD,” she said, referring to the Chinese electric vehicle and battery maker that had a $5.6bn share sale in March.
Hong Kong-listed ECM activity hit $73.1bn so far this year, up 232 per cent on the same period in 2024, according to data from LSEG.
“We’ve seen quite a strong turnaround with respect to equity issuance from Chinese companies in Hong Kong,” said Saurabh Dinakar, head of Asia Pacific global capital markets at Morgan Stanley.
Rising US-China tensions have put the banks’ operations in Hong Kong under more scrutiny. This month, a US congressional committee wrote to Morgan Stanley’s chief executive Ted Pick to request more information on the bank’s underwriting of Zijin Gold, the offshore arm of China’s Zijin Mining.
The committee alleged that Zijin Mining is associated with human rights abuses in the Xinjiang region of China and has “deep ties” to the communist party.
Morgan Stanley declined to comment on this matter.
Federico Bazzoni, executive chair of Eight Capital Partners, said Chinese companies “need these [western] banks to reach out to international investors”. He added: “Of course, you’ve got the trade war and political tension but I think the markets are opportunistic.”
Chinese banks have expanded in Hong Kong, with the goal of taking a larger share of advisory fees in the territory, where deals often have bigger fees compared with mainland China.
CICC, a prominent mainland investment bank, recently announced a plan to acquire two smaller brokerages.
“We are seeing Chinese securities firms expanding aggressively in Hong Kong,” said Rowena Chang, a director at rating agency Fitch. “Typically they want a US investment bank and a local investment bank as joint sponsors.”
Chinese banks CICC, Citic Securities and Huatai Securities top this year’s Hong Kong deal volume for IPOs alone.
They have established relationships with Chinese companies that are already listed on a mainland bourse, said Jean Thio, a partner in the capital markets group at law firm Clifford Chance, which has advised on 18 IPOs in Hong Kong this year.
Chinese banks are important partners for mainland companies seeking to list in Hong Kong because of their close channels of communication with regulators in Beijing such as the China Securities Regulatory Commission, which must give mainland companies approval before they list offshore.
“Communication with the CSRC is important and that’s where the PRC banks have strengths,” Thio added.
Data by Haohsiang Ko