In the IPO Capital of the World, Western Banks Go Hungry

Reuters/Bobby Yip/Files

Elzio Barreto of Reuters reports that although it was a sleepy fishing village just three decades ago, the southern Chinese city of Shenzhen last year hosted more IPOs than New York, Hong Kong and London combined – averaging one each business day, and unleashing a gush of fees for bankers, lawyers and advisers.

As equity capital markets have cooled across Asia, the bustle and high fees in a market just an hour’s train ride from Hong Kong make Shenzhen one of the biggest untapped opportunities for global banks. While the fees are tempting for those Wall Street and European bankers who have derided Shenzhen as a Wild West venue for small, untested firms listing at sky-high prices, it’s the local banks and brokers leveraging their Chinese credentials that have reaped the benefits.

“It’s hard, really hard. It’s a local market for local market participants,” said one equity capital markets banker at a global investment bank, who didn’t want to be named as he was not authorized to speak publicly on the matter.

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