Hong Kong Passes NYC in Attracting IPOs

A photographer takes a picture of the logo of the Industrial and Commercial Bank of China (ICBC) in Hong Kong in this Oct. 15, 2006 file photo. Hong Kong's market surged past the New York Stock Exchange this year and became the world's second most popular place, after London, for companies to float new stock listings. One of them was the world's biggest ever: the US$21.2 billion offering in October by Industrial & Commercial Bank of China, the mainland's largest lender. (AP Photo/Vincent Yu, File) (Vincent Yu - AP)

HONG KONG -- Hong Kong surged past New York this year and became the world's second most popular place _ after London _ for companies to float new stock listings.

The city's amazing success was due to several factors, analysts say. Being next door to mainland China's booming economy was a huge help. Tough new U.S. accounting rules have discouraged many companies from listing in America.

Perhaps most importantly, Hong Kong benefited from a new trend that involves the rise of regional markets, diminishing the importance of places like New York. With the help of powerful computers and increasing liquidity, capital can easily zoom around the world, scouting for the best investments.

But Hong Kong is keenly aware the competition for global investors is fierce. Already, there's much discussion about how long the good times can last. Some are worrying about other upstart markets _ especially the Shanghai Stock Exchange _ which might soon be able to elbow their way into the big leagues.

Hong Kong's big advantage now is that it has a solid legal and financial system that can handle big initial public offerings, or IPOs. Shanghai isn't close to being able to match this city, and that's why a parade of China's biggest banks decided to launch record-breaking IPOs in Hong Kong this year.

One of them was the world's biggest ever: the $21.9 billion offering in October by Industrial & Commercial Bank of China, the mainland's largest lender.

With two weeks left in the year, Hong Kong has raked in HK$307.7 billion, or US$39.57 billion, in IPOs _ nearly twice as much as the HK$165.7 billion raised last year, according to Hong Kong Exchanges & Clearing Ltd., the listed firm that operates the stock exchange.

London was the world leader for IPO equity raised, with $48.92 billion raised, according to the World Federation of Exchanges. Hong Kong was second and the New York Stock Exchange lagged back in third with $33.61 billion, according to the most recent WFE figures, which included the January-November period.

That may be partly because some American companies are holding back from listing in the U.S. due to the strict rules under the Sarbanes-Oxley anti-fraud law, opting instead to stay private.

But few of them have turned to Hong Kong. The growth in IPO issuance here has been driven almost entirely by Chinese companies eager to tap international capital markets.

Beating out New York for the No. 2 spot has inspired much chest-thumping by Hong Kong leaders. Frederick Ma, secretary for financial services and the treasury, has argued that the IPO success confirms Hong Kong's status as an international financial center. And he contends that it will continue to grow because of its strong link to China.

"If China becomes a large economy rivaling the U.S., then Hong Kong will grow to the extent of New York and London," he said in a speech to the Foreign Correspondents' Club.