People walk past a screen displaying the Hang Seng stock index outside Hong Kong Exchanges, in Hong Kong, China July 19, 2022. REUTERS/Lam Yik
HONG KONG, June 30 (Reuters Breakingviews) – To divine the fate of Hong Kong’s market, look to two of the year’s biggest offerings: Contemporary Amperex Technology (300750.SZ), the mainland-listed battery giant whose oversubscribed $4.6 billion secondary debut bolstered hopes a long deals drought was over; and FWD, an insurer headquartered in the city whose $442 million initial public offering was most noteworthy for just getting done after years of delay.
The deals reflect a shift away from IPOs and towards share placements in Hong Kong by companies already trading in Shanghai or Shenzhen. Such secondary deals have raised $9.8 billion year to date — more than triple the haul from first-time listings, per Dealogic.
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The drawback for bankers, though, is that they will rake in lower fees than on big IPOs, where underwriters typically get up to 2.5% of total proceeds. In contrast, those on CATL’s placement were paid a maximum 0.76% in commissions, per Reuters. But these offerings carry no foreign exchange risk for international investors seeking China exposure. The sheer size of China’s $12 trillion onshore market, and real demand from companies like CATL for dollar funds to expand abroad, provide reason to hope the momentum will continue.
That will be unambiguously good news for the $68 billion Hong Kong Exchanges and Clearing (0388.HK). The bourse’s shares have rallied 43% this year as U.S.-China tensions and Beijing’s freeze on domestic offerings have left Hong Kong the only option for large-scale Chinese share sales. Meanwhile, enthusiastic mainland traders using Hong Kong’s Stock Connect programme — who according to Goldman Sachs now account for roughly a fifth of total daily turnover — have spurred a broader tech-driven rally for AI stocks without domestic listings, including Alibaba (9988.HK) and Tencent (0700.HK).
That underscores why the exchange cannot thrive indefinitely on reheated mainland offerings – much less maintain its reputation as a global capital-raising centre. To that end, HKEx CEO Bonnie Chan has been ramping up efforts to pursue listings from Southeast Asian and Middle Eastern companies. Better yet would be a debut from a rapidly growing company that offers something novel to both global and Chinese investors. Lucky, then, that fast-fashion retailer Shein plans to file for a Hong Kong listing, Reuters reported, alongside other potential IPO candidates like AI darling MiniMax. Those could augur more proper debuts in turn.
- Secondary listings in Hong Kong by companies already traded on mainland stock exchanges have raised $9.8 billion year to date—more than triple the haul from initial public offerings in the city, according to Dealogic.
- China-founded fast-fashion retailer Shein plans to confidentially file a draft prospectus to list in Hong Kong, Reuters reported on June 27, citing three unnamed sources with knowledge of the matter.
Editing by Robyn Mak ; Production by Aditya Srivastav
Our Standards: The Thomson Reuters Trust Principles.
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