The Saudi and Hong Kong finance communities pledged to strengthen ties and talked up their respective IPO books as the Hong Kong edition of Tadawul’s flagship Capital Market Forum wrapped last week. Here’s everything you need to know:

#1- Hong Kong wants to be a gateway to Chinese capital for Saudi companies looking to raise funds, Hong Kong public broadcaster RTHK reported, citing statements by Deputy Financial Secretary Michael Wong. Working closer together will help both countries fulfill “ambitious goals in finance and well beyond,” Wong said.

Saudi returned the love: “We believe Hong Kong is a great partner for us. They’ve been doing a great job in the past few years, and I think they’ve established themselves as a destination for international investors looking to invest in Asia,” the Saudi Stock Exchange CEO Mohammed Al Rumaih said. “So, for us, as a country that is gearing up to become a thriving economy and having the biggest stock market, or the biggest skeletal market, within that time zone, I think Hong Kong is a great partner to connect the Middle East with the East,” he said.

Hong Kong officials are looking to set up a trade and economy office in Saudi, Wong revealed, without providing further details.

AND- Hong Kong’s flagship carrier Cathay Pacific will relaunch direct flights to Riyadh in the fourth quarter of this year, he said.

ANOTHER ETF IN THE WORKS

#2- An ETF between Saudi and Hong Kong could be in the making: Wong said Hong Kong and Saudi are considering setting up an ETF on Tadawul that would track Hong Kong indexes, according to Reuters. No further details were provided, but the Hong Kong government is said to be working with a number of unnamed financial institutions to develop the ETF.

Discussions are still underway on the ETF, but its launch is “dictated by the appetite of asset managers to do so,” Tadawul Group’s Chief Sales and Marketing Officer Nayef Al Athel told South China Morning Post (watch, runtime: 4:46). “We are in discussions with several global asset managers and asset managers that are based in mainland China and Hong Kong. There is interest, and there is a lot of work being done to try to reciprocate the effort being done in Hong Kong towards Saudi,” Al Athel said. “I am pretty confident that we would see another ETF listing in Saudi and maybe in more ETF listings in Hong Kong.”

BACKGROUND- The first Saudi ETF in Asia debuted in Hong Kong last November. Fund manager CSOP Asset management said at the time it was looking to cross list the ETF in Shanghai in the second half of the year.

The Hong Kong experience: “Every single regulation that has been implemented on the Saudi exchange, whether it was the IPO book-building frame or the secondary offerings regulations that were recently issued, Hong Kong was part of that benchmark.” Al Athel said.

IPO WATCH-

#3- Saudi and Hong Kong are banking on an IPO boom, with Tadawul’s Al Rumaih telling Bloomberg on the sidelines of the forum that he expects the IPO bonanza at home to continue with up to 50 companies seeking listings. “We have more than ten IPOs approved but waiting for book building and dealing with the asset managers to determine listing and offering dates,” Al Rumaih said. “And the good thing about those IPOs is not just the number, but the diversity,” he said. “So they are from different sectors, different sizes in different stage in their life cycle.”

Hong Kong’s IPO rebound is “inevitable” with listings by leading companies from the region coming to the exchange, South China Morning Post reported, citing statements by Hong Kong Exchanges and Clearing Limited (Hkex) CEO Bonnie Chan Yiting. More than 100 listing applications have been submitted to the HKEX this year after officials took steps to make listing easier. “It is just a matter of time [before] some of the biggest Middle East companies will launch IPOs raising funds in Hong Kong,” she said.

Making sure everything is in place for cross-listings: “We want to have a path ready for them in case they decide to do so,” Al Rumaih said when asked about the prospects of cross listings by Saudi companies in Hong Kong or vice versa.

IN CONTEXT- Hong Kong’s IPO market is off its slowest start since 2009, the Financial Times notes, saying “IPOs in Hong Kong raised a total of USD 604 mn in the first three months of this year, down 29% from last year.” The outlook for the rest of the year isn’t much better: The city will probably face a “double whammy of elevated US interest rates and weak confidence in China-related assets” through year’s end, the salmon-colored paper cites one pundit as saying.

SAUDI IPO PIPELINE AT A GLANCE-

Among the transactions now in the market or expected soon:

  • Water treatment outfit Miahona has priced its IPO at the top of the range after recording strong investor appetite (see story, below);
  • Fintech startup Rasan is set to sell a 30% stake, with subscription now open to institutional investors.
  • Dr Soliman Abdul Kader Fakeeh Hospital looks set to become the largest IPO so far this year;
  • Budget airline Flynas is reportedly looking to go public this year;
  • Fourth Milling Company will list before the end of June;
  • Singapore’s Olam Group is mulling the IPO of its Olam Agri subsidiary on Tadawul;
  • Hypermarket operator Lulu is said to be eyeing a dual listing on Tadawul and ADX;
  • Aster DM Healthcare looks set to spin-off its GCC assets and seek a dual listing on Tadawul and in the UAE.

Companies have so far raised nearly USD 700 mn through IPOs this year, with the largest current IPO being Modern Mills which listed in March.

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