London’s
financial district is ramping up efforts to lure Chinese companies to its stock
exchange as the city grapples with one of its worst IPO droughts in recent
memory. The push comes as Europe’s largest financial center watches Hong Kong
rake in billions while London struggles to attract new listings.
And
although eToro’s
recent debut on the City’s trading floor was a success, it is still not
enough to compete with the rapidly growing Asian tiger and Wall Street, which
continue to dominate the sector.
Hong Kong’s Success
Highlights London’s Struggles
Chris
Hayward, who leads policy for the City of London Corporation, didn’t mince
words about the challenge facing Britain’s capital markets. “We need to
get more IPOs happening in London,” he told reporters during a visit to
Shanghai this week. “We don’t want to lose business across the
Atlantic.”
The
contrast between the two financial hubs couldn’t be starker. Hong Kong has
pulled in more than $27 billion from new share sales and additional offerings
in just the first half of 2025, already surpassing the annual totals from the
previous three years. Meanwhile, London has managed only four pending or
trading IPOs this year, a figure that underscores how far the city has fallen
behind its Asian rival.
London’s
stock connect program with China, launched back in 2019, was supposed to bridge
this gap. The initiative allows companies from both countries to list on each
other’s exchanges through depositary receipts, giving investors easier access
to cross-border opportunities.
But six
years later, the results have been disappointing – only a handful of Chinese
firms, including Huatai Securities, have taken advantage of the program,
raising a combined $6.6 billion with lackluster trading volumes.
Regulatory Hurdles and
Market Dynamics
LSE has
been trying to make itself more attractive to Chinese companies by relaxing
some listing requirements. David Schwimmer, CEO of the London Stock Exchange
Group, previously indicated the exchange was looking at more flexible
accounting standards to accommodate Chinese listings through Global Depository
Receipts.
However,
Chinese companies face their own regulatory challenges at home. China’s
securities regulator has tightened oversight of overseas listings, creating
additional hurdles for companies looking to raise capital abroad. Some
high-profile cases, like fast-fashion giant Shein, have seen companies abandon
London IPO plans due to regulatory delays and pivot to other markets like Hong
Kong.
Beyond
attracting listings, London is also working to strengthen its position as an
offshore yuan trading center. The city established a working group with China’s
central bank in 2018 to monitor yuan markets in the UK capital. Hayward said
the authority has been encouraging global asset managers to create new
yuan-denominated products to boost the currency’s international use.
*Converted
to USD at approximate exchange rates
Challenges at Home
London’s
IPO struggles aren’t just about competition from Asia. The city faces domestic
headwinds, including recent tax changes affecting wealthy non-domiciled
residents and tighter immigration policies. While Hayward downplayed these
concerns, he acknowledged they could impact London’s appeal as a global
financial center and urged the government to review the non-dom tax situation.
“It’s
important to us to try and keep wealth creators in this country,” he said.
In an effort to address the issue, the UK Treasury is trying
to persuade Revolut, Monzo, and other major local fintechs to consider going
public at home. London has been missing blockbuster tech listings for years.
In 2024, chip designer ARM
chose Nasdaq, following the path taken earlier by many other
companies.
The London
market’s valuation discount compared to other global exchanges has also made it
less attractive for companies considering where to list their shares. This
structural challenge, combined with broader European deal drought conditions,
has created a perfect storm for London’s equity markets.
As Hayward
heads to Hong Kong later this week for IPO discussions, the pressure is on to
find ways to reverse London’s fortunes and reclaim its position as a premier
destination for global capital raising.
This article was written by Damian Chmiel at www.financemagnates.com.
