Stock exchange operators in Hong Kong, Shanghai and Shenzhen have agreed on conditions that will allow mainland investors to trade Hong Kong-listed dual-class shares of some popular technology companies, such as Xiaomi or Alibaba, through the Stock Connect programs, reports Caixin Global.
Hong Kong’s securities regulator and stock exchange have announced changes to how they will combat backdoor listings, a tactic used by companies that might not otherwise qualify to list. The new rules will go into effect on October 1 and target changes in de facto control of listed companies or large-scale issuance of shares that result in such changes.
The amendments will expand the listings regime’s test for control and de facto control to include both changes in an issuer’s controlling shareholder as well as changes in the single largest shareholder able to exercise effective control.
The changes to Hong Kong’s listings rules come as HKEX seeks to shore up its reputation in the wake of a listings scandal and ongoing investigation into a top former employee for suspected corruption and misconduct in public office “in relation to the vetting of listing applications” of two listed companies. Read more on SCMP
Plans are afoot to expand the “Stock Connect” programs that allow investors in Hong Kong, Shanghai and Shenzen to trade stocks on each others’ bourses. The Hong Kong Monetary Authority says it will expand the programs “at an opportune time”. Forgive our exuberance, if you will, dear readers, but that sounds like the language regulators often use instead of saying, “we have been told to get on with it”.
It would seem that pressure from Greater Bay Area investors is driving a more aggressive liberalization timetable. The Shenzhen-Hong Kong Stock Connect was launched in 2016, two years after the Shanghai version led the way. Quotas were quadrupled in May last year: RMB52 billion ($7.56 billion) for northbound trading links and RMB42 billion for southbound trading links. But there is clearly scope for more. The country is becoming bolder in opening its markets, not just because of pressure from the US-China trade war, but because of its own liberalization timetable. The Stock Connect programs are in the vanguard of reform. They are the best and most obvious way to keep prising open the treasure chest of China’s domestic consumer markets, as well as fund the country’s hi-tech boom that is well under way.
According to the Hong Kong Stock Exchange, as of November 15, 2018, total turnover of northbound trading had reached RMB8.77 trillion (US$1.31 trillion), with a net inflow of RMB614.8 billion, while HK$6.55 trillion was traded southbound, with a net inflow of HK$812.8 billion. Daily northbound trading reached a record RMB76.3 billion on April 8 this year. Southbound trading, however, has not surpassed the record of HK$43.8 billion set on February 6, 2018.
Forgive the haze of stats, but what that adds up to is a fraction of the domestic numbers. There is huge upside potential here for foreign institutional investors. And it is becoming ever clearer from senior leaders’ public statements that foreign capital is going to play a strong supporting role, if not a leading one, in the next stage of the country’s economic development.
We are holding our breath.
Read more on Global Times.
Since the Hong Kong stock exchange revised its IPO rules last year, allowing unprofitable biotech firms to list, the city has become the world’s second largest biotech fundraising center. This is according to Wilfred Yiu, head of markets at HKEX.
Speaking at the Asia Venture Capital Forum in Hong Kong yesterday, Yiu said 84 new stocks were listed in the first half through HKEX, raising HK$70 billion. Seven were biotech companies. According to KPMG, Hong Kong also benefits from proximity to a large pharmaceutical market with growing demand for healthcare services.
Read more in Chinese.
The Hong Kong stock market slipped to third place in global initial public offerings in the first half, losing its crown to New York. But analysts expect the imminent Alibaba mega-listing to bring back some excitement, reports Caixin Global.
Hong Kong Exchanges and Clearing embraced 76 new listing as of June 19, a drop from last year’s 101 offerings at that point. However, funds raised jumped 38% YoY to HK$69.5 billion yuan ($8.9 billion), thanks to some big deals including brokerage firm Shenwan Hongyuan’s $1.16 billion offering in April. It was the highest for the same period since 2015, according to accounting firm Deloitte.
Deloitte expects 200 IPOs to be completed in Hong Kong this year, raising between HK$180 billion and HK$250 billion.The consultancy said trade frictions may drive some U.S.-listed Chinese companies to consider a Hong Kong listing. The expansion of full convertibility, which allows mainland companies listed in Hong Kong to freely convert their nonlisted shares into H-shares, will attract more business, too.
The Nobel and Turing Laureates Hong Kong Summit took place yesterday, attracting more than 500 professionals and experts from the fields of biotech, computer science, mathematics, and finance, as well as – you guessed it – recipients of the Nobel Prize, Turing Prize, and Fields Medal.
Hong Kong’s Finance Secretary, Paul Chan, took the opportunity to boast that the government had put HK$100bn into “innovation and technology” in the past two years. It had also established a biotech platform at the Hong Kong Science and Technology Park. Ba Shusong of the Hong Kong Stock Exchange noted that nine biotech companies had listed on HKEX, and ten others have applied to be listed.
The summit was the first event of the International Innovation and Technology Hub Forum, which was launched by the Greater Bay Area Homeland Investments Limited, manager of a government-backed RMB100 billion private equity fund aimed at supporting high-tech industries in the Greater Bay Area.
Read more (in Chinese).