Cornerstone Investors and Initial Public Offerings on the Stock Exchange of Hong Kong

The Stock Exchange of Hong Kong had an exuberant 2006 when it listed sixty-two companies. The listing of the Industrial and Commercial Bank of China Limited on its Main Board gained the exchange the enviable status of being home to the world’s largest initial public offering while the HK$333.2 billion in IPO capital raised during the year propelled it to the position of second amongst global exchanges behind London but ahead of New York. This article examines an increasingly common feature of initial public offerings in Hong Kong namely the introduction of ‘cornerstone investors’ whose participation contributes positively towards enhancing the general receptiveness of an issue. However this approach does have a significant downside namely the creation of a new category of investor whose existence may not be completely consistent with the principles of equity of the Listing Rules in Hong Kong