Western banks have been the biggest beneficiaries of the Hong Kong stock sell-off this year, ignoring tensions between America and China, as deal-making has flourished in the Asian financial hub.
Morgan Stanley raised $11.6 billion through equity offerings through the end of November, with Goldman Sachs coming in second with $7.4 billion, followed by Chinese banks CITIC and CICC, and then Swiss bank UBS.
The data includes both initial public offerings (IPOs) and additional share sales offers for companies already listed on the stock exchange, including a $4.6 billion IPO for CATL, the world’s largest battery manufacturer, and the IPO of mining company Zijin Gold.
Hong Kong's capital markets have seen a resurgence, fueled by a wave of Chinese companies raising billions of dollars in the city, putting it on track for its highest IPO fundraising in four years. Foreign investors are also showing renewed interest in Chinese stocks after years of shunning the market.
“The big deals still need these global brands,” Alicia Garcia-Herrero, chief Asia-Pacific economist at Natixis, told the Financial Times.
She added: The reason there is still a need for Goldman Sachs or Morgan Stanley is the desire of companies to attract foreign investment, especially in large deals like BYD, referring to the Chinese electric vehicle and battery company that carried out a $5.6 billion share offering in March.
Trading activity in Hong Kong's listed stock markets (ECM) has reached approximately $73.1 billion so far this year, up 232% compared to the same period in 2024, according to LSEG data.
Saurabh Dhinakar, head of global capital markets for Asia Pacific at Morgan Stanley, said that share issuances by Chinese companies in Hong Kong have undergone a very strong transformation.
Tensions between America and China
Escalating tensions between the United States and China have led to increased scrutiny of banks operating in Hong Kong. This month, a US congressional committee sent a letter to Morgan Stanley CEO Ted Peake requesting more information about the bank's role in underwriting the initial public offering (IPO) of Zijin Gold, the overseas arm of China's Zijin Mining.
The committee accused Zijin Mining of being linked to human rights abuses in China’s Xinjiang region and of having “deep ties” with the Communist Party.
Federico Pazzoni, CEO of Eight Capital Partners, said that Chinese companies need these Western banks to connect with international investors. He added, Of course, there is a trade war and political tensions, but I believe that markets are moving according to the opportunities available.
Chinese banks have expanded their presence in Hong Kong to capture a larger share of the financial advisory fees in the territory, where transaction fees are typically higher than in mainland China. CICC, one of mainland China's leading investment banks, recently announced plans to acquire two smaller brokerage firms.
Rowena Zhang, a director at the credit rating agency Fitch, said, Chinese securities firms are aggressively expanding their presence in Hong Kong. She added, These firms typically prefer to have a US investment bank and a local investment bank as joint underwriters for deals.
Chinese banks CICC, CITIC Securities and Huitai Securities topped the list in terms of deal volume related to initial public offerings in Hong Kong this year.
Jan Thieu, a partner in the capital markets group at the law firm Clifford Chance, which has advised on 18 initial public offerings in Hong Kong this year, said these banks have established strong relationships with Chinese companies already listed on local stock exchanges within China.
Chinese banks are a key partner for mainland Chinese companies seeking to list in Hong Kong, thanks to their close communication channels with regulators in Beijing, most notably the China Securities Regulatory Commission (CSRC), which must grant approval to companies before they list abroad.
Theo added: Communication with the China Securities Regulatory Commission is essential, and this is where the strength of Chinese banks lies.
