IN ARCHITECTURE, a cornerstone is laid where two walls meet, serving as a single point from which the building takes its shape. No one constructs an entire building out of these weighty slabs. So it is meant to be in finance. To perk up interest in initial public offerings (IPOs), companies sometimes invite in “cornerstone investors”: a small number of big investors who promise to buy a stake and hold it for a while, a vote of confidence from which the IPO takes shape. Odd, then, to see a trend in Hong Kong of IPOs constructed almost entirely out of these weighty pledges.

The latest is the Postal Savings Bank of China, a lender with 500m retail customers. Its shares started trading on September 28th, capping a $7.4 billion IPO, the world’s biggest in two years. A share sale of that size would normally dominate headlines in the financial press. But this one passed quietly, and for good reason. Just a small portion of its shares were actually sold to the public. Nearly 80% went to cornerstone investors, just shy of a record. 

Cornerstones, still rare in other markets, have long been a staple in Hong...Continue reading