Fudging Hong Kong's IPO numbers
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Fudging Hong Kong's IPO numbers

The Special Administrative Region's regulator has botched its attempt to clean up the thorny issue of pre-deal research.

Hong Kong's chief markets regulator, the Securities and Futures Commission (SFC), has been a busy place of late. Currently on the reform agenda are 21 separate proposals designed to streamline and improve the IPO process in Hong Kong. These measures have assumed a greater international relevance since Hong Kong has cornered the market for China listings after America cooked its own China goose with Sarbanes-Oxley.

The SFC is currently in consultation mode and wants feedback on the measures, most of which constitute laudable improvements to the current system, a cumbersome and over-regulated documentary morass. If you doubt it, just ask one of Hong Kong's bleary-eyed bankers.

On the thorny matter of pre-deal research, however, the SFC has demonstrated considerably less backbone. Indeed one of its proposals looks like a messy fudge that threatens to make the current IPO procedure more cumbersome not less so.

Many serious markets, the US and Japan among them have already banned pre-IPO research issued by sponsors and deal-related investment banks on their clients as inherently flawed and impossibly biased. Hong Kong, like much of Europe has continued to accept this fiction as useful to an IPO.

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