Fintech companies are rushing to raise equity in Hong Kong to fund expansions in cryptocurrencies, capitalising on investor fervour as the city starts accepting applications for stablecoin issuer licences on Friday.
At least 10 Hong Kong-listed companies raised a total of more than $1.5 billion from share placements in July to be invested in areas including stablecoins, digital assets and blockchain-based payments, according to a Reuters calculation based on exchange filings.
They include digital asset platform OSL Group (0863.HK), China's biggest retail cloud solution provider Dmall Inc (2586.HK) and artificial intelligence giant SenseTime Group (0020.HK).
The equity offerings had been snapped up by investors upbeat about stablecoins, which are cryptocurrencies pegged to assets such as the U.S. dollar.
Hong Kong's stablecoin bill passed in May is taking effect on Friday as the Asian financial hub races the United States in setting up a regulated market for such tokens, seen as a key lubricant in the burgeoning digital economy.
Before the bill passed, raising funds for stablecoin development in Hong Kong held less appeal for investors.
"We're seeing a notable increase in fundraising activity linked to stablecoins and digital assets," said Anthony Pang at international law firm Baker McKenzie, which advised on Dmall's HK$388 million ($49.43 million) share placement last month.
"The momentum in this space is real, and it's accelerating."
OSL raised $300 million in late July to support global initiatives including development in stablecoins and a digital payment network.
The equity raising was completed within three days after the company appointed Macquarie (MQG.AX) to help with the offering, and the bookbuilding - which attracted sovereign wealth funds and big hedge funds - took less than three hours.
"Investor zeal toward cryptocurrencies and stablecoins was palpable," OSL Chief Financial Officer Ivan Wong said.
An index tracking Hong Kong-listed stablecoin concept stocks has surged 65% this year, far outperforming the benchmark Hang Seng Index (.HIS), which is up roughly 23%.
Hong Kong's de facto central bank cautioned the public last week against "growing frothiness" and "excessive exuberance" due to the recent hype around stablecoins.
PRIVATE MARKET
The crypto exuberance has also spilled into the private equity and startup markets.
"Venture capitalists are very interested in this area, and many are actively looking at such projects," said Liu Honglin, a Shanghai-based attorney at Man Kun Law Firm, who helped venture capital-backed digital payment service provider Kun raise more than $50 million in Hong Kong last month.
"There's definitely a lot of excitement around stablecoin, but the sector is far from being frothy. It's just the start of a trend."
JF SmartInvest Holdings (9636.HK) raised HK$785 million last month to invest in Real World Assets (RWA), a term used for digital tokens that represent traditional assets such as stocks and commodities.
Chinese AI giant SenseTime raised HK$2.5 billion and will use part of the proceeds to explore areas such as blockchain, RWA and stablecoins.
Other companies that tapped the crypto craze include ZA Online (6060.HK), Crypto Flow Technology (8198.HK) and Easou Tech (2550.HK).
Traditional finance players such as custodians and investment managers want a piece of the action, so "interest in these topics, and fintech applications more generally, is set to continue," said Kishore Bhindi, a Hong Kong-based partner at law firm Linklaters.
($1 = 7.8499 Hong Kong dollars)
