When Chinese firms like the state-owned oil company PetroChina Co (
But that's not what the Bank of China (
The IPO is part of a recent wave of Chinese firms that are skipping New York entirely. Hong Kong's new popularity for the mega IPOs is seen by some as the latest trend in globalization -- the rise of a new world with many financial capitals.
"The fact that so much foreign money and institutional investment is placed in the Hong Kong stock market proves the confidence of international investors in our system," Hong Kong's Secretary for Financial Services Frederick Ma (
But skeptics argue that the Chinese firms -- called "red chips" and "H-shares" in local lingo -- don't dare list in the US because their finances are as murky as a bowl of sweet-and-sour soup. The critics say Hong Kong's less rigorous financial disclosure regulations mean fewer headaches for the firms.
David Webb, a retired investment banker and shareholder activist, said Hong Kong's stock exchange has some serious catching up to do with other global markets. He said new rules are needed to protect shareholders' rights and to require faster reporting.
"Hong Kong is the last market in Asia that doesn't require large companies to report quarterly. It's because of resistance from the tycoons. That can't last much longer," said Webb, who serves as an elected non-executive director of the Hong Kong Exchanges & Clearing Ltd, the listed firm that operates the stock exchange.
Webb said the rules also allow companies -- especially state-run Chinese firms -- to raise cash from a public listing and loan the money to an unlisted parent company or other related business in which the shareholder has no economic interest.
"So there's a risk that by co-mingling, by mixing up the money of the listed company and the parent, that you can end up with bad debt," he said.
Other issues critics say need to be addressed are:
One, companies can wait four months to report annual results when the international norm is 60 days.
Two, shareholders can't bring class action lawsuits in Hong Kong, so corporate collapses caused by wrongdoing rarely result in shareholder litigation.
Three, listing rules aren't statutory so a company's leaders can't be fined or jailed for breaking them.
But the exchange said in a statement that Hong Kong has adopted international accounting examples and its market is "open, fair, effective and transparent." The exchange added that it's also appealing to Chinese companies because of its proximity to the mainland and the large pool of investment bankers here.
"There are no foreign exchange controls. There is no capital gains tax," the statement said. "There is no withholding of income in respect of taxes."
Many of the Chinese firms have been scared away from US markets by the tough Sarbanes-Oxley anti-fraud law, said Steven Cheung (