HK becomes a safe haven for US-listed Chinese firms

HK becomes a safe haven for US-listed Chinese firms

The Hong Kong stock exchange is likely to benefit from a pipeline of new dual major listings as many Chinese companies look for a safe haven in case they may be forced to delist through US markets.

After nine businesses completed their dual-primary listings in Hk this year, about thirty more including e-commerce giant Alibaba Team and video-sharing system Bilibili have submitted their applications for the same arrangement this year or even in 2023.

Analysts said double primary listing within Hong Kong has become the best choice for the US-listed Chinese companies that were ordered by the US to meet its management standards. They said several so-called China idea stocks might first in Hong Kong the coming year.

The particular analysts also said although China as well as the US had signed an agreement in late Aug to solve the human resources disputes of US-listed Chinese firms, it was uncertain whether each sides would bargain on new marketing practices by the end of the year.

Between March and May, the US Securities and Trade Commission (SEC) announced that more than a hundred US-listed companies could be delisted if they could not meet up with US accounting standards.

The Tiongkok Securities Regulatory Percentage, the country’s stock exchange watchdog, noting it stood firmly against politicizing securities regulation, said that China’s Ministry of Finance acquired recently made optimistic progress after interesting with the US Community Company Accounting Oversight Board.

The particular disputes, together with pathogen outbreaks in Hong Kong and mainland Cina, created huge downwards pressure on the Hang Seng Index, which usually on March fifteen closed at eighteen, 415 points, down 36% from a season earlier.  

Alibaba’s American depositary receipt (ADR) also fell to as little as US$76. 76 on that day, down 75% from its peak of US$309. ninety two on October twenty three, 2020.

Alibaba has introduced it plans a primary listing in Hong Kong. Image: Agencies

Those that have finished their dual main listings in Hong Kong this year include Guangzhou Xiaopeng Motors, Li Auto, Miniso plus BeiGene.
The methods for a dual primary listing were just like those for an preliminary public offering (IPO) on the main plank, said Conita Hung, investment strategy movie director at Tiger Faith Asset Management.

After Alibaba increases primary listing standing in Hong Kong, it will have to fulfill a higher information disclosure requirement, producing its shares more appealing to international institutional investors, Hung additional.  

Nicolas Aguzin, chief executive of the Hong Kong stock exchange, told mainland media in April which he expected the trend associated with more US-listed Chinese language firms debuting in Hong Kong would carry on.

He stated about 170 businesses had applied to go public in Hk. Some of them chose to possess dual primary entries instead of secondary entries as they wanted to become included in the Stock Connect program, in which mainland investors can business their shares.

He said US-listed Chinese companies could significantly improve their aktionär mix with dual primary listings in Hong Kong.

According to the current list rule in Hk, US-listed Chinese companies can apply for a secondary listing in Hk if their market values have reached certain ranges. Large companies such as JD. com and Alibaba plan supplementary listings in Hk but they are excluded from the Stock Link program.

In contrast, shares of smaller sized companies such as Xiaopeng Motors and Li Auto, which have main listings in Hk, saw higher liquidity in the stock markets after they had been included in the Hang Seng TECH Index as well as the Stock Connect program earlier this year.

Xiaopeng Motors’s Xpen. Picture: Electrek

Huang Wentao, main economist and main macro analyst associated with CITIC Construction Expense, wrote inside a research report upon Wednesday (September 7) that about 32 US-listed Chinese companies would have their dual primary listings within Hong Kong this year or in 2023.

Huang said these companies, which are mainly involved in IT, financial plus retail businesses, were expected to raise HK$81. 9 billion ($11. 83 billion) in Hong Kong this year and HK$17. 5 billion in 2023. He or she opined that this kind of fund-raising demand may not have a big detrimental impact on Hong Kong share markets.

Upon August 26, the US Public Company Data processing Oversight Board (PCAOB), the China Investments Regulatory Commission (CSRC) and China’s Ministry of Finance agreed upon a statement associated with protocol, which will allow PCAOB to inspect and investigate registered public accounting firms headquartered in mainland The far east and Hong Kong.

According to the agreement, PCAOB will send teams to mainland Tiongkok and Hong Kong to find out whether the Chinese side’s promises hold up. The teams will record their work towards the PCAOB at the end of this season. The CSRC stated the Chinese side would take part in plus assist in the interviews and testimonies of relevant personnel associated with audit firms asked for by the US.

A CITIC Investments report said on September 3 that Hong Kong would be the best location for the PCAOB to check the review papers of the US-listed Chinese firms. This said the initial contract signed by the CSRC and PCAOB last month could help reduce the risks of having some of these firms delisted all of a sudden.

It mentioned a total of 26 US-listed Chinese companies had come back to go public in Hk, mainly through secondary listings, over the past couple of years while their mixed market cap amounted to HK$5. fifty four trillion, or 15% of the total market cap of all Hk stocks.

Hong Kong stocks could get a good start by second listings. Image: AFP

It stated that, as it was achievable that China and the US would not manage to compromise on any new accounting practices later this year, many Chinese companies still needed to prepare backup plans in case these were forced to delist in america. It said China and taiwan concept stocks using a combined market cover of about HK$1. four trillion would seek to list in Hong Kong.

On July 21, the New York Stock Exchange and Singapore Exchange (SGX) agreed upon a to collaborate at the dual listing of companies on both exchanges plus work together in a number of some other key areas focused on the capital markets. The spokesperson for the SGX said the bourse provided different ways just for Chinese firms to visit public in Singapore.

Prior to this, the US-listed NIO, a Chinese e-vehicle maker, had supplementary listings in Hong Kong in March and in Singapore in May. The organization has become the first China and taiwan concept stock to become listed in all 3 markets.  

Read: US-China audit agreement not really yet a performed deal

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