Mainland Chinese investment banks and brokerage firms have expanded into Hong Kong, in a bid to profit from the world’s largest IPO fundraising hub last year by volume of deals.
The trend accelerated in the first quarter of 2016 when Chinese institutions climbed up the Asia ex-Japan ECM league tables.
During the three-month period, eight of Asia ex-Japan and Australia’s top 10 investment banks by ECM deal volume were mainland Chinese institutions.
High-profile examples of IPOs fully underwritten by Chinese institutions include the Bank of Tianjin's HK$7.36 billion offering in March.
Bankers at US and European rival firms said Chinese banks are seizing market share by fiercely cutting fees to win deals. As many Chinese brokerage firms have completed fundraising plans, they are also able to leverage on their strong cash positions to underwrite equity deals and expand their advisory teams.
Meanwhile, foreign bulge-bracket banks have fallen down the ladder partly due to muted deal activity outside China and Hong Kong where Chinese banks have less of a presence. The combined deal volume in South East Asia, for example, was only about 6% that of Hong Kong in the first quarter, according to Dealogic.
Chinese securities firms are expanding into offshore markets to diversify away from the highly-regulated onshore IPO market where listings were suspended for 15 months between 2012 and 2014, followed by another four-month ban in the second half of last year.
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