Chery plans $1.5b Hong Kong IPO without Wall Street banks

Chery Automobile, one of China’s leading car exporters, is preparing for a Hong Kong initial public offering (IPO) that could raise about US$1.5 billion.

The listing will be led by Chinese banks, with no involvement from Wall Street institutions.

The IPO is sponsored by China International Capital Corporation (CICC), Huatai Securities, and GF Securities.

JPMorgan Chase, initially selected by Chery in late 2024, opted out before formalizing its role, according to sources.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ Geopolitical tensions accelerate financial market decoupling

The absence of Wall Street banks in Chery’s IPO reflects a broader trend of financial decoupling between the U.S. and China, not just an isolated deal decision.

U.S. banks have dramatically reduced their participation in Chinese IPOs, underwriting only 12% of such listings since 2020, down sharply from 45% in 2018 1.

This retreat stems from specific concerns about Chery’s Russian market activity after the Ukraine invasion, alongside broader congressional scrutiny of U.S. banks facilitating Chinese listings 1.

The House Select Committee on the Chinese Communist Party has targeted banks for underwriting firms potentially linked to military applications or human rights concerns, creating substantial reputational risk 1.

For Chery, a company positioning itself for global expansion with plans for a $1 billion EV factory in Turkey, the all-Chinese bank arrangement may limit its international investor reach despite the significant $1.5 billion size of the offering 2.

2️⃣ Chinese investment banks gain competitive edge in fee wars

The Chery IPO illustrates how Chinese banks are stepping into the void left by retreating Western institutions, creating a more competitive underwriting landscape in Hong Kong.

Fee structures have collapsed dramatically, with some recent deals offering base underwriting fees as low as 0.2% compared to the historical average of 1.2% 3.

This aggressive pricing by Chinese banks like CICC, Huatai Securities, and GF Securities is reshaping the economics of going public in Asia, as they prioritize market share and relationship-building over immediate profitability 3.