Hong Kong mulling listing of Spacs: Finance chief

The city's economy has struggled under political and social unrest in 2019 and last year's coronavirus outbreak. PHOTO: REUTERS

HONG KONG (BLOOMBERG) - Hong Kong is exploring allowing the listing of special purpose acquisition companies (Spacs), jumping into a market that has sparked a frenzy of US dealmaking.

The government has asked the Hong Kong exchange and the city's financial regulator to look into having Spacs list, according to Financial Secretary Paul Chan.

The aim is to allow the new fundraising arrangements, while upholding investors protections, he said in an interview with Bloomberg Television on Tuesday (March 2). "We are looking at it seriously," he said, without providing a time-line.

Spacs, or blank-cheque companies, raise money from investors and then look to acquire another business, usually a private one, within two years. Historically just a US product, a growing number of Asia-based funds and financiers have been setting up Spacs with the aim of snapping up a target in the fast-growing region.

The listing of Spacs has propelled IPO deals in the US to the fastest pace in 12 years so far this year, with the vehicles comprising 77 per cent of the announced offerings. The city's main Asian competitor, Singapore, is looking at opening up for Spacs. Hong Kong's tycoons, including billionaire Li Ka-shing, are planning to raise such funds in the US.

Allowing Spacs would further add momentum for the Hong Kong exchange, which last year had the busiest IPO year in a decade, boosted by the listing of a string of high-profile Chinese technology companies.

The initial steps into Spacs come after the city shook markets last week by raising the stamp duty on stock trading by 30 per cent to 0.13 per cent as part of an effort to boost spending and relieve economic distress amid a record budget deficit and the highest unemployment in 16 years. Shares sold off broadly on Wednesday as the budget was announced, sending the stock of the city's bourse plunging almost 9 per cent.

Mr Chan hit back at criticism that the move would harm the financial hub.

"According to the information available to us up till now, we don't think this modest increase in stamp duty has in anyway harmed our competitiveness," he said. The government has no plans to withdraw the hike and isn't at this time planning any more increases, he said.

"We will continue to monitor the situation, the market development and at this stage, I will not commit one way or the other," Mr Chan said.

Economic Momentum

The city's economy has struggled under political and social unrest in 2019 and last year's coronavirus outbreak, with tourism and consumption evaporating and unemployment surging. After a record 6.1 per cent contraction last year, the economy will grow in a range of 3.5 per cent to 5.5 per cent in 2021, the city estimates.

Unveiled on Feb 24, the budget outlined HK$120 billion (S$20.6 billion) of fiscal support to spur consumption and ease joblessness. Key measures include a HK$5,000 consumption voucher for residents and new arrivals, as well as loans to the unemployed.

Mr Chan continues to be optimistic Hong Kong's economy will pick up momentum from the middle of the year and ultimately return to growth. It's particularly important to support the retail and restaurant industries to help accelerate the recovery, he said.

"It will be important for us to inject additional resources into the economy" such as the HK$5,000 electronic vouchers, he said. The scope of the vouchers will be as wide as possible so residents can spend it according to their own circumstances, he said.

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