Hong Kong is now the world’s most developed financial market, displacing the US from the top position, according to the World Economic Forum’s Financial Development Report 2011.
Hong Kong had the highest scores across seven criteria, including institutional and business environment, financial stability, financial services and markets and financial access.
The achievement boosts the general perception of Hong Kong and puts a shine on Asia in general, which is particularly helpful when raising a fund in the region, said Dale Fischer, a partner at Pinsent Masons LLP in Hong Kong, who advises on private equity-backed M&A transactions in Asia.
He said the top ranking, which included an assessment of the Hong Kong stock exchange, will make benchmarking more attractive to private equity firms that are deciding to buy or sell a company in Asia.
“One way private equity firms benchmark a targeted company is against listed companies in the same sector,” Fischer said. “If you’ve got a strong legitimate exchange like Hong Kong does, they feel very comfortable with the benchmarking they can do.”
Hong Kong scored the highest in the world for the amount of initial public offerings proceeds, according to the report. But the ranking comes at a time of declining IPO value in Hong Kong. Private equity-backed IPOs on the HKex have underperformed to date this year, generating a value of only $2.9 billion, 43 percent down on last year’s $5.1 billion, according to figures from data provider Dealogic, which PE Asia reported earlier.
Several businesses that have received backing from private equity firms have recently postponed IPOs. The latest was Haitong Securities, backed by private equity firm Warburg Pincus, which is expected to delay its IPO until 2012.
Fischer believes market volatility and macroeconomic threats to growth don’t tarnish the longterm picture. The report, he said, underscores the robust IPO track record of the HKex and has made Hong Kong attractive for private equity companies looking for exits.
“We’ve seen the markets go through cycles before,” Fischer said. “But in terms of private equity, the [shorterm] cycles are not a big factor at all.”
Singapore and Australia also ranked in the top five in 2011, but their scores were down slightly from last year, according to the report.
2011 2010 2011 Change
rank rank score (1–7) in score
Hong Kong SAR 1 4 5.16 +0.12
United States 2 1 5.15 +0.03
United Kingdom 3 2 5.00 –0.07
Singapore 4 3 4.97 –0.08
Australia 5 5 4.93 –0.08
Source: World Economic Forum’s Financial Development Report 2011