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On Sunday, they said it had committed “serious violations of the law in collecting and using personal information” and yanked it from app stores.

'We are very used to this type of regulatory development and uncertainties, and ultimately the commercial logic will prevail and the financing and IPOs will continue.Just days after Didi Chuxing went live on the New York Stock Exchange, Chinese regulators announced on Friday that the ride-hailing service was under review and banned it from signing up new users. 'Ultimately they'll have to list somewhere else,' he said. 'We're in a world where it's not really that hard for Chinese firms to raise a large quantity of capital without listing their shares aboard.'Įven so, UBS' Chin said it is doubtful that many Chinese companies can meet domestic listing requirements, which have become more stringent this year. Powerhouses such as Goldman Sachs have been ramping up their staffing, seeking to double or triple their headcounts in mainland China, as they expand to capture billions in potential profits in the world's second-largest economy.Ĭhina's Nasdaq-like Star market has made it easier for technology firms to access funding at home, though it places an emphasis on companies focused on hardcore technology and innovation.Ĭhina's dependence of foreign capital to fuel its businesses has decreased from where it was less than a decade ago, said Mr Martin Chorzempa, senior fellow at the Peterson Institute for International Economics. The tighter regulatory regime comes against a backdrop of China opening its financial market to allow foreign banks and asset managers to set up wholly owned firms. In mainland China, fees for listing on Shanghai's tech-heavy Star board are about equal to the US, but sponsors are required to co-invest in between 2 per cent and 5 per cent of the shares issued by their clients, an unusual arrangement that may limit interest in leading deals due to the need for a capital base onshore. That increases by about two percentage points or more for deals below US$500 million, bankers familiar with the matter said. The rerouting will undercut fees banks can earn after a decade in which Chinese firms raised about US$76 billion through first-time share sales in the US.īanks typically charge about 1.5 per cent to 2 per cent for billion-dollar offerings in Hong Kong, compared with 3 per cent to 5 per cent in the US, as fees vary with sectors and underwriters.

'Currently the HK IPO pipeline is ridiculously vibrant.' 'Some Chinese companies that operate in sensitive sectors might be thinking of listing in Hong Kong instead of the US,' said Haitong International equity capital markets managing director Kenneth Ho. If IPOs of Chinese unicorns grind to a halt, the Hong Kong exchange should still be boosted by secondary listings and the conversion of American depository receipts, according to Bloomberg Intelligence analyst Sharnie Wong. Hong Kong looks well placed to benefit from the geopolitical and regulatory frictions, though dealmaking in the financial hub may also become entangled in the regulatory push. The Cyberspace Administration of China said on Saturday that its proposed review would address risks for data to be 'affected, controlled, and maliciously exploited by foreign governments'. The China Securities Regulatory Commission is now leading efforts to revise overseas listings rules that would require VIE firms, which do business in China but are registered in places like the Cayman Islands, to seek approval before selling shares overseas, Bloomberg has reported. For two decades, China's technology giants have sidestepped restrictions, using the so-called Variable Interest Entity (VIE) model to attract foreign capital and IPO offshore. So far this month, the Nasdaq Golden Dragon Index - which tracks some of the biggest Chinese firms listed in the US - has shed some US$145 billion in value.Īt the heart of the recent crackdown is how far regulators will go to check foreign investment in sensitive industries, particularly those controlling vast amounts of data. Valuations for China's technology firms, which were already falling before the recent onslaught, now look shakier as investors signal they will demand steeper discounts to buy shares, said one banker, asking not to be named discussing internal business.

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