Hong Kong's renewed IPO momentum is testing the human-resourcing capacity of investment banks operating in the city, particularly Chinese institutions that have rapidly expanded their presence in the listing sponsor market. Regulators have recently signalled concern about application standards and have introduced restrictions intended to slow the pace at which senior sponsor bankers manage multiple mandates.
Last month the Hong Kong Securities and Futures Commission (SFC) issued warnings to 13 banks over what it described as "serious deficiencies" in IPO applications. The regulator instructed those banks to perform a comprehensive internal review of their sponsor work and set a limit of six simultaneous deals per signing principal - the senior banker registered to carry out sponsor duties on a listing.
The SFC did not publish the names of the banks that received warnings, but it said the listing applications handled by those 13 firms made up roughly 70% of the market share in the Hong Kong listing market. That concentration has focused attention on intense competition for mandates - competition that has become tighter as margin pressure in the equity capital markets squeezes revenues.
Industry recruiters and trade guild representatives say the squeeze on margins has pushed banks to pursue a higher volume of deals to support their cost bases. Sid Sibal, managing director at Aster Recruiting, said firms need to close more transactions to generate sufficient revenue and are therefore aggressively hiring sponsor principals. He described the situation as a short-term talent war in a specialist niche, with both global bulge-bracket firms and regional Asian banks looking to add experienced sponsor staff.
Regulatory action follows earlier guidance issued in December by the SFC and the local stock exchange to listing sponsors - the banks that lead IPO processes. Market participants viewed that communication as an uncommon public admonition about the quality of listing applications. A person with knowledge of the matter said the recent SFC warnings went to the investment banks that had acted as sponsors in the bulk of recent listing applications; that person declined to be named because the discussions were private.
The number of companies seeking to list in Hong Kong has surged in recent months. Exchange data show that IPO applications more than doubled from 160 in June of last year to 414 as of Monday, with 96 new applications lodged in January alone. That tidal increase in workload has come as several banks face reduced headcounts following a downturn in deal activity.
Industry guild councillor Kenny How of the Hong Kong Securities & Futures Professional Association (HKSFPA) said Chinese investment banks are dealing with a growing roster of clients. The expansion of these firms in the Hong Kong market has been notable: CICC, CITIC Securities and Huatai International have increased market share and in recent years have dominated the listing business, followed by China Securities International and Guotai Junan International, based on compiled filing data.
Data compiled by LSEG indicate Chinese banks captured nearly 70% of Hong Kong's listing fee pool, which totalled $579 million last year - a marked increase from 48% in 2019. Attempts to contact the named Chinese banks for comment were not answered; a SFC spokesperson declined further comment beyond referring to the regulator's circular issued on January 30.
Staffing pressures extend beyond senior sponsor capacity. HKSFPA's How noted that sizable IPOs require significant input from bankers and legal advisers across the transaction lifecycle, and that a rebound in deal flow stresses both senior and junior ranks. Since 2023, some banks including CITIC and CICC, along with many foreign investment banks, reduced their investment banking headcount in Asia, including staff focused on China-related work, after a slowdown in deals. The industry has seen some hiring, but bankers and headhunters say these moves have not kept pace with the rebound in listings that began in late 2024.
As banks race for mandates, sources in the sector said they are encountering difficulty in assembling the necessary resources to supervise and produce higher-quality application documentation. Publicly available registration data show the five main Chinese banks have, respectively, 19, 21, 15, 5 and 7 signing principals registered with the SFC to perform sponsor responsibilities. Industry sources say some banks have tried to fill capacity gaps by bringing mainland mainland investment banking staff into Hong Kong or relocating employees to the city to support sponsor duties.
The SFC has tightened scrutiny of who carries out sponsor work. Its warning last month said that individuals engaging in IPO sponsor activities will face more stringent examinations after regulators identified instances where ineligible staff were allowed to perform sponsor duties.
The regulator's recent actions and the broader staffing dynamics underline a key operational challenge for the sector: whether banks can scale experienced sponsor coverage quickly enough to maintain application quality as deal volumes rise. Until staffing levels and supervision processes adjust to the pace of listings, both banks and the wider Hong Kong capital markets face an elevated risk of substandard submissions and regulatory intervention.