HK IPOs remain resilient as prospects for China ADR homecomings burn bright – HKEX executive

30 July 2020

Mergermarket reporter Florence Shiu recently interviewed Christina Bao, head of global issuer services at Hong Kong Exchanges and Clearing (HKEX), to discuss the bourse’s view on COVID-19 challenges, China-US political tensions, wave of China ADR dual-listings, and competition from mainland counterparts.  

Mergermarket reporter Florence Shiu recently interviewed Christina Bao, head of global issuer services at Hong Kong Exchanges and Clearing (HKEX), to discuss the bourse’s view on COVID-19 challenges, China-US political tensions, wave of China ADR dual-listings, and competition from mainland counterparts.  


Mergermarket: Hong Kong was one of the earliest markets to be hit and subsequently recover from the novel coronavirus. As such, Hong Kong IPOs have been closely monitored by many in terms of the pace of recovery. How has the pandemic impacted HK IPOs?


Bao: It’s true that travel bans and social distancing measures have postponed the IPO timeline of some companies in the first quarter of 2020. However, the IPO market in 2Q rebounded and performed well despite all the challenges, highlighting its resilience. We welcomed a total of 64 companies as of 30 June, raising total funds of around HKD 87.5bn (USD 11.2bn), representing an increase of 22% from a year earlier. HKEX is among the top three global stock exchanges for IPO funds raised year-to-date.  


Importantly, the global pandemic has strengthened – rather than undermined – the fundraising interest among biotech companies. We are pleased that the efforts to implement a new listing regime for biotech firms under Chapter 18A two years ago have paid off.  A total of 11 healthcare and biotech companies have submitted listing applications in 1H, including four pre-revenue biotech companies. We are confident about the prospects of the healthcare industry and are committed to help grow and develop this very important sector in the region. 


There are currently 150 healthcare companies listed on HKEX, with a combined market capitalisation of HKD 1.9trn, up 72% from April 2018, when the new listing regime was first launched. 


Nasdaq, Shanghai Stock Exchange, and HKEX led the global IPO market in terms of volume and funds raised in the first half of 2020, according to Dealogic. Both Dealogic and Acuris are owned by ION Group.


Mergermarket:  There are concerns that accelerating China-US political tensions and social unrest since last year may fundamentally hurt investors’ confidence in this Asia financial hub. What is the current situation? 


Bao:  Our robust IPO pipeline speaks for itself. 129 companies have submitted listing applications with the HKEX in the first half, and more are lining up for the second half. As China’s capital markets continue to internationalize, our role in driving global liquidity has become increasingly significant, and we are optimistic about the opportunities that this will present.  


For example, there has been growing interest in many US-listed Chinese companies to conduct a dual listing in Hong Kong amid global macro uncertainties.   


As the leading venue for investing into and out of mainland China, Hong Kong and HKEX will continue to go from strength to strength. We are at the intersection of the East and the West, and the current geopolitical backdrop means that we are more relevant than ever.  


Our goal is to further increase our international relevance to China and Asia, and our Asia relevance to the global markets, serving as the venue of choice for investors and issuers across the Asia time zone.  


Mergermarket: Would you consider Chinese ADR “homecoming” listings as a key theme for the HKEX in 2020? Which listings have been successful so far and who is next? 


Bao:  It certainly is the big theme for this year. Hong Kong’s capital markets have benefited from the recent secondary listings of US-listed Chinese companies with a boost in capital fundraising, market capitalization, as well as trading in both cash and derivatives markets.  


The robust trading volumes in these companies, which are mostly in the new economy segment, demonstrated keen investor interest and could pave the way for other US-listed Chinese companies.   


In fact, Hong Kong’s IPO market has welcomed many new economy and biotech companies since April 2018, when HKEX launched its new listing regime. Issuers in the new economy sector accounted for more than 50% of total IPO funds raised during the period. 

Mega Hong Kong listings of US-traded Chinese names since 2019 included Alibaba Group Holding [NYSE:BABA; HKG:9988], [NASDAQ:JD, HKG:9618] and NetEase [NASDAQ:NTES, HKG:9999], with a total market capitalization of over HKD 6.48trn as of 30 July. 


Below is a list of potential secondary listing candidates in Hong Kong:  


  • Pinduoduo [NASDAQ:PDD], the USD 114.6bn market-cap Chinese e-commerce operator, has hired CICC, Credit Suisse, and Goldman Sachs for a secondary listing this year in Hong Kong, as exclusively reported by Mergermarket on 14 July.  
  • Yum China[NYSE:YUMC], the USD 19.8bn market-cap operator of Pizza Hut and KFC outlets in China, has filed a confidential IPO application to the Hong Kong stock exchange, with CICC and Goldman Sachs working on a potential USD 2bn listing, as reported on 19 June.  
  • GDS Holdings [NASDAQ:GDS], the USD 12.7bn market-cap Chinese developer and operator of high-performance data centers, is considering a secondary listing in Hong Kong as early as this year.  
  • Baidu[NASDAQ: BIDU], the USD 41.2bn market-cap Chinese tech giant, has reportedly been considering a dual listing in Hong Kong.   
  • Trip[NASDAQ:TCOM], the USD 16.5bn market-cap Chinese online travel agency may relist in Hong Kong, and approached CICC, JPMorgan and Morgan Stanley for a mandate, as reported in January.  
  • Bilibili [NASDAQ: BILI],  the USD 14.4bn market-cap Chinese online entertainment platform, is mulling a secondary listing in Hong Kong.  
  • TAL Education [NYSE:TAL], the USD 47.1bn market-cap Chinese online educational group, has been talking to banks over possibility of secondary listing in Hong Kong, as reported in June. 
  • ZTO Express (Cayman) [NYSE:ZTO], the USD 28.5bn market-cap express delivery firm, which is the largest in China, has been in talks with investment banks to award an advisory mandate for a secondary listing in Hong Kong, as reported in June. 


Mergermarket: China has been reforming listing rules in Shanghai’s STAR board to encourage loss-making companies to raise capital at home. Is the competition getting heated?  


Bao:  We are happy to see the development of the STAR board. Actually, anything that builds and enhances the broader greater China regional financial ecosystem is good for Hong Kong and for HKEX.   


Hong Kong’s capital markets have unique competitive advantages. We have a robust legal regime, a well-developed and trusted listing platform, as well as a banking and professional services industry that conform with the highest international standards of quality and transparency.  


The companies need to consider different factors when choosing a listing venue that fits with the company’s overall strategy. These factors include the listing regulatory framework, investor composition, international exposure, as well as ease of re-financing, all areas that underscore the strength of the HKEX. 



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