Hong Kong experiences an influx of US$20 billion in stock listings from China’s tech giants
The Hong Kong stock exchange is being flooded by Chinese tech tycoons who are listing their companies in increasing numbers on the exchange, thus reinforcing the impression of the city as Asia’s biggest financial hub. The agreements signed so far are valued at over $20 billion.
While the rich and powerful in Hong Kong are prepping for worst-case scenarios, given the pandemonium that has broken out over a new proposed national security legislation, numerous mainland billionaires see this as an opportunity to make it big.
NetEase’s William Ding Lei and Richard Liu Qiangdong of JD.com recently listed their companies on the Hong Kong stock exchange in June. Their moves come on the heels of the Alibaba Group Holding corporation founded by Jack Ma, whose stock issuance conducted in November happened to be the biggest ever listing the city had seen since 2010. Alibaba owns the South China Morning Post.
The companies owned by these three titans have been able to raise over $20 billion from investors in Hong Kong. It is estimated that many more companies will be following this trend for a long time to come.
Deloitte China’s southern region managing director Edward Au stated that tech companies owned by Chinese billionaires were fueling Hong Kong’s market with the capital it needed for a transformational change into a safe and reliable financial hub in the continent. The stock exchange has also been taking steps to make itself seem more appealing for fledgling companies and startups.
Tuesday saw the city’s new national security legislation being promulgated into existence – a move that threatens to erode the city’s judicial independence and freedom from mainland entities, something that appealed immensely to international investors and companies. The US is now passing laws to make it difficult for sensitive American tech to be exported to Hong Kong as well.
Although Chinese moguls have numerous factors for pursuing new listings here, their moves also reassure both domestic and international investors that Hong Kong is not losing its title as Asia’s biggest financial hub. Political legislation in the USA has also made it difficult for investors to enter the American market, thus forcing them to turn to alternatives.
The Chinese tycoons whose companies trade on the Hong Kong exchange are collectively valued at over $182 billion, which is more than the collective net worth of Hong Kong’s ten richest people, as per Bloomberg’s Billionaire Index.
Hong Kong has become their best alternative given that Chinese companies that are listed in US stock exchanges are coming under increasing scrutiny. Tensions between both countries have been on the rise since the Trump presidency began and accounting scandals rampant in Chinese companies haven’t helped their case either.
NetEase and JD.com were able to raise over $7 billion between each other with the secondary listings held last month – which accounted for almost 67% of what Hong Kong has been able to raise in 2020 so far. Deloitte is expecting another 6 Chinese companies, which are currently listed in US exchanges, to hold a second stock listing in China by 2021. Baidu, owned by Robin Li Yanhong, is currently considering this option as well.
Hong Kong relaxed its stringent listing regulations back in 2018 in a bid to attract corporations like Meityan Dianping and Xiaomi Corp, which are all heavyweight players in their respective industries. It is speculated that these moves could eventually change the Hang Seng Index’s composition entirely. The index manager changed the criteria in May, which allows companies like Alibaba to be part of the index for the first time.
Louis Lau of KPMG China, who is a partner in its capital markets advisory division, stated that these new companies would improve the overall representation of the new-economy firms in the city, thus adding diversity and vibrancy to the markets. The listing of major Chinese firms and companies at a continuous pace also shows the world that Hong Kong still remains Asia’s biggest financial hub for the foreseeable future.Source