Hong Kong stock IPO "explosion," Morgan Stanley and Goldman Sachs remain the biggest winners

Despite the increasing influence of Chinese securities firms in the domestic market, Wall Street investment banks led by Morgan Stanley and Goldman Sachs remain the biggest winners in this year's strong recovery wave of the Hong Kong equity capital market, consolidating their dominant position on the trading stage of the Asian financial center.

With a large number of Chinese companies seeking financing in Hong Kong and overseas investors rekindling their interest in Chinese stocks, the Hong Kong capital market is experiencing a significant recovery. According to data from the London Stock Exchange Group (LSEG), the total amount of equity capital market (ECM) activities in Hong Kong has reached USD 73.1 billion so far this year, soaring 232% compared to the same period in 2024, with the financing amount from initial public offerings (IPOs) expected to reach a four-year high.

In this capital feast, American investment banks have captured the largest share. According to data compiled by Bloomberg, as of the end of November this year, Morgan Stanley helped companies raise USD 11.6 billion in equity issuance transactions in Hong Kong, ranking first. Goldman Sachs follows in second place with USD 7.4 billion raised, followed by Chinese banks CITIC, CICC, and Swiss bank UBS Group.

This round of trading frenzy highlights the pragmatic mindset of the market. Although geopolitical risks are an unavoidable background noise for investors, the appeal of large Chinese enterprises to international capital and their demand to reach global investors make the role of Wall Street giants still indispensable.

Wall Street Giants Lead the Way

Data shows that Western banks hold an absolute advantage in this year's Hong Kong equity transactions. Saurabh Dinakar, head of global capital markets for Asia Pacific at Morgan Stanley, stated, "We are seeing a quite strong shift in equity issuance by Chinese companies in Hong Kong."

Bloomberg's data covers IPOs and follow-on stock offerings of listed companies. Major transactions this year include the USD 4.6 billion stock issuance by the world's largest battery manufacturer CATL and the IPO of mining company Zijin Gold. The successful execution of these transactions has solidified Morgan Stanley and Goldman Sachs' leading positions in the underwriting rankings.

Where is the "Moat" for Foreign Banks?

Analysts point out that despite the rise of Chinese institutions, for large transactions and Chinese companies looking to attract international capital, the globally recognized Wall Street giants remain the preferred choice.

Alicia García Herrero, chief economist for Asia Pacific at Natixis, noted, "For large transactions, you still need these global brands." She added, "The reason they still need Goldman Sachs or Morgan Stanley is that they want to attract foreign investment, especially in large transactions like BYD." In March this year, Chinese electric vehicle and battery manufacturer BYD completed a USD 5.6 billion stock issuance.

The "Home Advantage" of Chinese Securities Firms

Meanwhile, Chinese banks are actively expanding in Hong Kong, aiming to capture a larger share of the consulting fees in the Hong Kong market, which are higher than those in mainland China. Rowena Chang, a director at Fitch Ratings, stated, "We are seeing Chinese securities firms aggressively expanding in Hong Kong." The local advantages have enabled Chinese securities firms to excel in specific areas. Data shows that, in terms of IPO underwriting scale, China International Capital Corporation (CICC), Citic Securities, and Huatai Securities rank among the top in the Hong Kong market this year. Notably, the well-known mainland investment bank CICC recently announced plans to acquire two smaller securities firms.

Jean Thio, a partner in the capital markets department at Clifford Chance, analyzed that these securities firms have established solid relationships with Chinese companies that are already listed in the mainland. More importantly, they have smooth communication channels with mainland regulatory bodies such as the China Securities Regulatory Commission (CSRC), which is crucial for mainland companies looking to list abroad, as these companies must obtain regulatory approval in advance.

Jean Thio added, "Communication with the CSRC is important, and this is precisely the strength of Chinese banks." A common collaboration model is for companies to hire both a U.S. investment bank and a local investment bank as joint sponsors