Key Takeaways:
China’s securities regulator has effectively halted new Hong Kong listings of Chinese bubble tea makers by suspending its approval of such IPOs, according to Reuters
The move could signal a more aggressive approach by the CSRC in regulating which Chinese companies can list in Hong Kong and New York
By Doug Young
A recent tea party on the Hong Kong Stock Exchange appears to be over, at least for now.
That’s the decision coming from China’s securities regulator, which has decided to turn off the spigot of new listings by bubble tea makers in Hong Kong, according to a Reuters report last Friday, citing unnamed sources familiar with the situation. The China Securities Regulatory Commission (CSRC) made its decision based on the weak performance for bubble tea stocks this year, as well as weak market sentiment in general, Reuters said.
From our perspective, this particular development looks worrisome due to its implications for offshore listings by Chinese companies. China is notoriously protective of its domestic A-share markets in Shanghai and Shenzhen, often slowing or completely halting new listings when investor sentiment is weak.
In the latest sign of such intervention, the CSRC has become increasingly selective in the new listings it approves for Shanghai and Shenzhen, giving special preference to industries prioritized by Beijing such as semiconductors and new energy. That’s left other more mundane industries, mostly from the consumer sector, with little choice but to look overseas to raise funds through IPOs.
The CSRC rolled out a system last March requiring all Chinese companies to register with the regulator before making such offshore listings. But until now, such registration was mostly seen as a formality and China didn’t attempt to use the process to regulate the flow of listings to other markets. Now, that appears to be changing, in what some might see as China’s latest step to have more influence over Hong Kong’s largely market-oriented system.
We’ll return to the politics of this latest move shortly. But ...
