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Hong Kong is setting its sights on a $20bn listings revival this yr because it goals to use worsening US-China tensions and the sluggish mainland Chinese language fairness market.
Funding banks in Hong Kong expect a rush of listed Chinese language firms, led by battery maker CATL, to arrange a secondary itemizing within the offshore territory. These “A to H” listings — from China “A” shares to Hong Kong — might increase as a lot as $20bn in new funds, bankers say.
A replenished pipeline would mark a pointy pick-up in exercise for Hong Kong, which has misplaced some high-profile worldwide firms resembling cosmetics firm L’Occitane and struggled to exchange them.
A lot of these firms in China turning to Hong Kong have in depth abroad operations and need to increase funds exterior the mainland, as Beijing tightens capital leaving the nation. Geopolitical tensions between China and the US have made listings in New York, one other widespread pathway for Chinese language firms, far much less interesting.
“The Hong Kong market will bounce again this yr . . . and a giant element of that can be A to H listings”, stated Kenneth Chow, managing director at Citi in Hong Kong. He added that Chinese language secondary listings might account for as a lot as “two-thirds” of the whole estimated $20bn of listings in Hong Kong in 2025.
Among the many firms this yr which have confirmed plans to arrange secondary listings are prescription drugs producer Jiangsu Hengrui, which has a market capitalisation of $37bn, and soy sauce maker Foshan Haitian, valued at $32bn.
CATL has not but filed papers to the Hong Kong inventory change however Morgan Stanley estimates it might increase as much as $7.7bn — a transfer that has been difficult by its addition to a Pentagon checklist of firms with hyperlinks to China’s navy.
Even so, there are indicators of a market keen for brand new listings. Chinese language banks have provided to work on the CATL itemizing for underwriting charges of simply 0.01 per cent, the Monetary Instances reported on Wednesday.
Analysts at Deloitte’s capital market companies group estimate that Hong Kong can have 80 preliminary and secondary listings this yr, elevating as much as HK$150bn (US$19bn), largely by Chinese language firms. They’d be a part of family names that report a lot of their revenue exterior of the mainland, together with BYD and Tencent.
An inflow would additionally provide a shot within the arm to Hong Kong’s repute as a world enterprise hub. Greater than $10bn in fairness was raised, in major and secondary listings, within the metropolis final yr, in response to Dealogic. That marked an enchancment on 2023’s whole of $6bn however fell far wanting the report $51bn raised in IPOs in 2020 in response to HKEX knowledge. That bumper yr was additionally pushed by Chinese language firms searching for listings exterior the mainland.
The mainland Chinese language securities regulator has additional eased the trail for firms to checklist in Hong Kong to assist them broaden internationally, together with a latest pledge to “optimise the submitting system for abroad itemizing”. Different Chinese language firms have additionally given up their listings in New York in recent times, citing the excessive administrative burden and low turnover.
“We count on the quantity of listings, together with these of A+H share choices, to achieve additional momentum in 2025, as extra main firms from China and around the globe use [the HK] platform to broaden internationally,” a spokesperson for the Hong Kong inventory change stated.
Analysts say US President Donald Trump’s coverage in the direction of China might ship extra firms to the territory.
Many Chinese language firms have been compelled to delist from the US within the ultimate days of Trump’s first administration, when the president issued an govt order, citing fears of hyperlinks to the Chinese language navy.
“Geopolitical uncertainties [could prompt] extra Chinese language firms and US-listed China idea shares to show to Hong Kong as their most popular abroad itemizing hub,” Edward Au, southern area managing accomplice at Deloitte China, stated in a report.
Business executives say firms going to Hong Kong will hope to copy the efficiency of Midea. The family equipment maker raised about $5bn in an oversubscribed providing and its shares are up 27 per cent since its September float. That price of progress is quicker than its Chinese language equal and narrowed the low cost to the mainland A share.
An organization listed in China sometimes trades at a premium to its Hong Kong counterpart of as a lot as 40 per cent, because of the mainland market’s greater stage of native retail participation.
Regulators are intently watching the probably valuation of H shares and their low cost to A shares. A capital markets banker in Hong Kong informed the FT that he had had discussions with Chinese language authorities in regards to the potential valuation of H shares.
Authorities have centered on liquidity probably leaving the nation, devaluing Chinese language firms and inspiring arbitrageurs seeking to make a revenue from the distinction in costs between the 2 shares.
Giant-cap Chinese language firms resembling BYD are likely to have a a lot smaller low cost in Hong Kong, whereas smaller firms are comparatively unloved exterior of the mainland.
“The larger problem for our . . . tasks is that if we are able to slender the low cost between A and H shares even additional,” stated one govt at a Chinese language brokerage agency.
“We additionally suppose that there’s a excessive chance that there can be an extra rebound [in activity] in 2025,” he stated. He additionally expects about $20bn in fundraising this yr however added that “that is purely our personal estimate”.
Knowledge by Haohsiang Ko
