Contemporary Amperex Technology Co Ltd’s (寧德時代) upcoming jumbo listing, which could raise more than US$5 billion, is the type of deal that can inject a much-needed adrenaline shot into a sputtering market like Hong Kong’s. But it is fast becoming a headache for Wall Street banks.
That is because the electric-car battery giant, commonly known as CATL, recently offered a mere 0.2 percent base underwriting fee to bankers, plus possible incentives, according to people familiar with the matter.
That is less than what others have paid recently for similar big listings, and a far cry from the 1.2 percent that data provider LSEG said Chinese issuers typically paid for certain types of share sales such as second listings in the past decade.
Photo: AFP
For Wall Street banks — many of which have their Asia bases in the city — the worry is that rock-bottom fees become the norm, posing another problem in a market that has been in a prolonged slump and increasingly dominated by Chinese underwriters. It is also a sobering reminder of how deals in Hong Kong, and by extension China, have become less lucrative.
“The reality is quite tough for investment bankers from Wall Street banks as Asian clients don’t like to pay fees for their work if there’s not much value added,” said Veronique Lafon-Vinais, a former investment banker of more than two decades, who is now teaching at Hong Kong University of Science and Technology’s business school. “It’s probably going to get worse, particularly for bankers at US and European firms, as competition from Chinese banks is increasing.”
Chinese banks have reason to get more aggressive to land deals in Hong Kong. Ever since the country’s securities regulator started restricting initial public offerings (IPOs) in the mainland in 2023 to stabilize the stock market, business opportunities for the country’s investment banks have dried up at home. That has made overseas listings such as those in Hong Kong more important.
“Chinese banks have built up their expertise and relationships in recent decades and are now fighting like never before to grab market share from Wall Street firms,” Lafon-Vinais said.
Companies that already trade in mainland China typically pay less to add a listing in Hong Kong than in a first-time IPO. Shenzhen-listed CATL’s proposed fees still stand out. For example, appliance maker Midea Group Co (美的集團), whose shares already traded in mainland China for years, paid 0.6 percent in fixed fees, plus up to 0.2 percent in incentives for its US$4.6 billion listing in September last year.
Bank of America Corp, China International Capital Corp (中國國際金融), CSC Financial Co (中信建投證券) and JPMorgan Chase & Co are set to work with CATL on its listing. Despite the low fees, Wall Street banks still pitched to get on the CATL deal to avoid missing out on what could be Hong Kong’s biggest stock offering this year, people familiar with the matter said.
What is happening in Hong Kong has historical precedents in markets such as India, according to Philippe Espinasse, a former banker who has authored books on Asian IPOs.
“Competition among senior underwriters is increasing, in turn affecting the level of fees,” he said.
For now, the hope is that in Hong Kong, the increase in deal flow makes up for some of the reduced fees that bankers get. IPO proceeds in the city may double to more than US$22 billion this year, thanks to major floats by China-listed firms and the possibility of US-listed Chinese firms seeking second listings on the back of rising geopolitical risks, Bloomberg Intelligence analyst Sharnie Wong (黃穎珊) said.
SEEKING CLARITY: Washington should not adopt measures that create uncertainties for ‘existing semiconductor investments,’ TSMC said referring to its US$165 billion in the US Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) told the US that any future tariffs on Taiwanese semiconductors could reduce demand for chips and derail its pledge to increase its investment in Arizona. “New import restrictions could jeopardize current US leadership in the competitive technology industry and create uncertainties for many committed semiconductor capital projects in the US, including TSMC Arizona’s significant investment plan in Phoenix,” the chipmaker wrote in a letter to the US Department of Commerce. TSMC issued the warning in response to a solicitation for comments by the department on a possible tariff on semiconductor imports by US President Donald Trump’s
The government has launched a three-pronged strategy to attract local and international talent, aiming to position Taiwan as a new global hub following Nvidia Corp’s announcement that it has chosen Taipei as the site of its Taiwan headquarters. Nvidia cofounder and CEO Jensen Huang (黃仁勳) on Monday last week announced during his keynote speech at the Computex trade show in Taipei that the Nvidia Constellation, the company’s planned Taiwan headquarters, would be located in the Beitou-Shilin Technology Park (北投士林科技園區) in Taipei. Huang’s decision to establish a base in Taiwan is “primarily due to Taiwan’s talent pool and its strength in the semiconductor
An earnings report from semiconductor giant and artificial intelligence (AI) bellwether Nvidia Corp takes center stage for Wall Street this week, as stocks hit a speed bump of worries over US federal deficits driving up Treasury yields. US equities pulled back last week after a torrid rally, as investors turned their attention to tax and spending legislation poised to swell the US government’s US$36 trillion in debt. Long-dated US Treasury yields rose amid the fiscal worries, with the 30-year yield topping 5 percent and hitting its highest level since late 2023. Stocks were dealt another blow on Friday when US President Donald
UNCERTAINTY: Investors remain worried that trade negotiations with Washington could go poorly, given Trump’s inconsistency on tariffs in his second term, experts said The consumer confidence index this month fell for a ninth consecutive month to its lowest level in 13 months, as global trade uncertainties and tariff risks cloud Taiwan’s economic outlook, a survey released yesterday by National Central University found. The biggest decline came from the timing for stock investments, which plunged 11.82 points to 26.82, underscoring bleak investor confidence, it said. “Although the TAIEX reclaimed the 21,000-point mark after the US and China agreed to bury the hatchet for 90 days, investors remain worried that the situation would turn sour later,” said Dachrahn Wu (吳大任), director of the university’s Research Center for