December 26, 2013 7:00 pm JST

Alibaba conspicuously absent as public offerings boom in Hong Kong

NORIKO OKEMOTO, NQN staff writer

Alibaba Group's executive chairman Ma Yun

HONG KONG -- A surge in listings this year has catapulted the Hong Kong stock exchange into second place among global markets in terms of IPO fund procurement, a recent survey indicates. Despite the strong performance, investors were left with dashed hopes for a listing by one particular company: Alibaba Group, China's largest online retailer.

     The full-year tally of funds procured by going public on the bourse is projected at about 162 billion Hong Kong dollars (US$21.3 billion), according to the Ernst & Young survey, which was covered by the Hong Kong Economic Times earlier this month. That would likely put the Hong Kong market behind only the New York Stock Exchange, whose figure is estimated at HK$314.9 billion. 

     In 2012, the Hong Kong exchange ranked fourth in terms of funds garnered through initial public offerings. This year, it is seen topping the Nasdaq Stock Market of the U.S. in third place and the London Stock Exchange in fourth.

     The Chinese special administrative region saw its biggest year-to-date listing only recently, when China Everbright Bank went public Dec. 20. The midsize institution raised about HK$20 billion.

     The number of listings in Hong Kong is up as well. According to data from the Hong Kong exchange, 78 companies had debuted on the market as of the end of November -- already surpassing the 64 logged for all of 2012. A trader at a local brokerage said Japanese investors showed strong interest in Hong Kong IPOs in the second half of 2013, partly motivated by the Japanese stock market's steady performance in the period.

     Yet the company that stood to make the biggest splash in Hong Kong ended up staying out of the water.

     Alibaba had been a focus of listing rumors since the beginning of 2012. A number of markets were considered potential landing spots for the Chinese Internet company: New York, Shanghai, Hong Kong, or perhaps even somewhere else. Then, in mid-July of this year, it was reported that the company had picked Hong Kong. The planned IPO was estimated at US$100 billion. 

     What went wrong? Ma Yun -- Alibaba's executive chairman, who is better known as Jack -- reportedly sought a dual-class listing structure. This would have allowed the company to issue different types of shares accompanied by different voting rights, helping Ma maintain control over the company. But while the NYSE allows this sort of structure, the Hong Kong bourse insisted on standing by the principle of one share, one voting right.

     Alibaba came back with an alternative plan, proposing a partnership system under which a few executives would be given the right to appoint directors. Again, the Hong Kong exchange said no.

     Given the potential magnitude of an Alibaba listing, some market players criticized the exchange's lack of flexibility, saying it would weaken the Hong Kong market's competitiveness. At any rate, there is lingering speculation that Alibaba may yet go public in Hong Kong.