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South China Morning Post
6 days ago
- Business
- South China Morning Post
Regulatory changes have built momentum in Hong Kong IPOs
Hong Kong stock exchange (HKEX) reported a surge in IPO activity in the first quarter of the year, with 17 new listings attracting a total of HK$18.7 billion (US$2.38 billion), nearly quadrupling year-on-year figures. The growth follows regulatory reforms implemented in 2024 that helped the city strengthen its role as a global financial hub. 'The Hong Kong IPO market has picked up its momentum after a slowdown in previous years,' said Edward Au, southern region managing partner for Deloitte China. 'We have expanded our forecast for the Hong Kong IPO market in 2025, expecting around 80 listings to raise approximately HK$200 billion over the year if the market situation continues to be conducive.' Hong Kong's capital market overhaul comes at a time when global financial hubs are competing more fiercely than ever, with sustainable investments gaining significant traction. Au said that the government's 2025-26 Budget builds on this momentum, proposing further reforms to optimise primary and secondary listing thresholds, and streamline post-listing obligations. 'These changes, if implemented promptly, could lower the entry barriers for high-quality overseas issuers and enhance certainty in the listing journey,' he said. Edward Au, southern region managing partner, Deloitte China. Photo: Handout Miguel Latorre, managing director of consulting firm Acclime, described the changes to Chapter 18C for specialist technology companies and the Technology Enterprises Channel as 'definitely a step in the right direction'. 'It sends a clear signal that Hong Kong wants to support innovation and align itself with global environmental, social and governance (ESG) capital flows,' said Latorre. 'By allowing earlier-stage, R&D-heavy companies – especially in green tech – to list before reaching profitability, it lowers a big barrier for companies building long-term solutions.' According to Au, current market momentum has been driven by several key factors. 'We observed a sustained inflow of funds, spurred by renewed global interest in China-related opportunities, particularly in AI and innovation,' he said. Mainland Chinese investors are increasingly participating as they enhance their offshore portfolios, while 'relatively modest' IPO pricing has helped maintain investor interest, he added. The robust pipeline reflects the momentum. Au revealed that HKEX was processing over 170 active IPO applications as of June 18 – a figure that excludes both confidential submissions under the new pathway for specialist technology and biotech companies, as well as secondary listing applicants.
RTHK
19-06-2025
- Business
- RTHK
HK likely to be top IPO market in 2025: Deloitte
HK likely to be top IPO market in 2025: Deloitte Deloitte forecasts that the city will raise over HK$200 billion of proceeds from 80 new listings this year. Photo: RTHK Southern region managing partner Edward Au said Deloitte China is "cautiously optimistic" that the city can be the top IPO market throughout this year. Photo: RTHK Accounting giant Deloitte on Thursday upgraded its forecasts for Hong Kong's initial public offering (IPO) market outlook for this year as the city regained the world fundraising crown in the first half, with money raised exceeding that by Nasdaq or the New York Stock Exchange. The firm noted that Hong Kong is set to see around HK$102.1 billion raised from 40 IPOs between January and June, which represents a 33 percent increase year on year in terms of number of deals and six to seven times more in terms of size. The strong performance was boosted by four mega A+H listings, including that of battery giant CATL, which raised HK$41 billion, as well as a H-share listing by bubble tea chain Mixue that raised HK$444 million. Deloitte now predicts the city will raise more than HK$200 billion from 80 listings this year – taking into consideration that almost 200 listing applications are currently in the pipeline, with five of them expected to raise at least HK$7.8 billion each. That's notably higher compared with its December forecasts of between HK$130 billion and HK$150 billion this year. The managing partner of Deloitte China's southern region, Edward Au, said the firm is "cautiously optimistic" that the city could maintain its top spot throughout the year – if there are no adverse geopolitical or macroeconomic disruptions at a time when the local bourse is continuing to woo global capital with reforms. "What Hong Kong needs to do is on liquidity, how to continue to attract investors to Hong Kong, and secondly, to connect with the other exchanges, for example, in Asean and the Middle East, to facilitate secondary listings in Hong Kong," he said. "The local bourse operator should also continue to upgrade its existing listing regime, to see if some of the listing rules and thresholds could be improved," he said. Most of the new IPO heavyweights will come from the technology, media and telecommunications, consumer as well as medical and life sciences industries, Au added.
Business Times
22-05-2025
- Business
- Business Times
Hong Kong ramps up tax checks on private equity, venture funds
[HONG KONG] Hong Kong authorities are intensifying tax checks of private equity and venture funds as the Asian financial hub faces pressure to plug deficits. Over the past 12 to 24 months, the Inland Revenue Department (IRD) has stepped up reviews on management fees and so-called carried interest to managers in Hong Kong. Some tax advisers said they have seen a jump of as much as 50 per cent in funds seeking guidance on how to respond to inquiries from the authorities during that period. Authorities are 'ramping up' their collection efforts, said Patrick Yip, vice-chair and international tax partner at Deloitte China. 'We have seen a noticeable increase in inquiries from fund clients seeking advice on how to deal with inquiries from the Hong Kong tax authorities in the last two years.' Hong Kong, which prides itself on its low taxes, is battling a sluggish economy and steep deficits after years of political upheaval, strict Covid curbs and a slumping housing market. The government is looking at drastic measures, including cutting 10,000 civil servant jobs and ways to boost revenue, such as potentially regulating basketball betting. In 2024, it raised taxes on high earners – the first hike in two decades. The city's top income tax rate is 17 per cent and it has no levies on capital gains. The IRD has a standing practice 'to select high-risk cases for post assessment review, including audit and investigation' which applies to all taxpayers and industries, a spokesperson said, adding that there's no 'step-up measure' applied to investment managers. As long as it's 'commercially realistic' and lacks the 'hallmarks of tax avoidance' the IRD will not interfere with business arrangement between a fund and the investment manager on the distribution of carried interest and fees, the spokesperson said. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Hong Kong authorities view carried interest as a performance fee, which is taxed at about 15 to 16.5 per cent, while management fees are subject to the 16.5 per cent corporate tax rate. While there's no specific data on fund reviews, the department's audit and investigation team assessed back taxes and penalties of HK$3.3 billion (S$543 million) during 2023/2024 for businesses and individuals, up 27 per cent from the preceding period. Still, the number of cases were roughly unchanged at 1,802, suggesting it went after bigger pots of money. Kenneth Yim, founder and tax partner at KYT, said in most cases over the past years the IRD has examined it has asked that carried interest, management and advisory fees be attributed to taxable local entities rather than offshore entities in places such as the Cayman Islands. 'In light of the government's budget deficit, the IRD has ramped up its enforcement efforts in recent years,' Yim said. 'This applies broadly to all taxpayers, including those in the fund industry. It's expected that the IRD will continue applying an increasingly stringent approach to reviewing cases in this regard.' As at 2023, about 650 private equity and venture capital firms with assets of US$215 billion had a home in the city, of which close to 60 per cent were regional headquarters, according to the Hong Kong Monetary Authority (HKMA). Concessions At the same time, the city has been seeking to lure funds, family offices and wealthy individuals with tax concessions to bolster its status as a global financial centre and wealth hub. Back in 2021, it passed a law exempting some carried interest, but it has not had the intended effect and is now being modified. The city's exemptions on carried interest was design to prod more funds to relocate back to Hong Kong, which would allow it to raise more taxes from fees. But managers have encountered difficulties fulfilling requirements – such as a certification by the HKMA, the city's de facto central bank. As a result, the concession 'has not been widely adopted,' according to a 2023 report by the Alternative Investment Management Association. To enhance the tax regime, the Financial Services and Treasury Bureau issued a paper in November 2024 with proposals including making more transactions eligible for carried interest concessions and doing away with the HKMA certification requirement. The government will formulate proposals to refine various preferential tax regimes for the asset and wealth management businesses including that for carried interest and aims to submit the proposals to the legislative council next year, with a view to apply the measures from 2025/2026, the spokesperson said. Hong Kong's latest push is coming at a tough time for investment firms that have struggled to raise money in recent years, with funding from US investors drying up amid rising geopolitical tensions. According to Deloitte's Yip, the firm has seen the tax authorities open up more audits of sub-managers for the pre-Covid years when the funds were having some of their better years, as the six-year statute of limitation is running out. The spokesperson for the tax authorities said that a review can cover a number of years, whether before or after Covid. Kher Sheng Lee, co-head of Asia-Pacific at Alternative Investment Management Association, said with the right policies Hong Kong can attract a larger share of income that is being kept in other jurisdictions. 'There's billions of US dollars at stake in management fees and carried interest tied to Hong Kong's alternative asset management industry,' said Aima's Lee. 'Much of that still sits offshore.' BLOOMBERG
