STOCK PRICES of dual-listed international companies are rising in Hong Kong and falling in New York.
“This should be reason enough for companies to re-list in Hong Kong and maintain listings in both Hong Kong and New York, in our opinion,” said financial analysts writing in Forbes yesterday.
CASH FLOWING SOUTH
This divergence is interesting, not just because of the difference in performance, but the root of the cash moving to Hong Kong: much of it is support from mainland China investors.
More than US$75 billion in investment has flowed from the rest of the country to the southern Chinese city of Hong Kong so far this year, almost as much as last year’s total.
The mainland financial scene is now sophisticated and an active player in Hong Kong. “April was the second highest inflow month for the program in its history, with inflows averaging $1 billion per day,” said the report from Brendan Ahern of Kraneshares.
“Southbound flow is regularly accounting for 30% to 50% of Hong Kong’s turnover.”
A KING’S LOST CROWN
For much of the past two decades, Hong Kong has beaten London and New York as the world leading location for IPOs (launches of stock listings). But Hong Kong and London both slumped badly in recent years.
Now there are signs that the situation is changing again. In 2024, the amount of total IPO funds raised in Hong Kong was more than HK$87 billion, putting the city back in the global top four. It would have been number three, except for one particularly large launch in Tokyo.
And even though it is a single small city, Hong Kong remained ahead of India, which hosted multiple launches over the past 12 months.
A count-up at the end of March showed that the Hong Kong Exchange this year was processing more than 100 listing applications, both for the main board and its tech start-ups board, known as GEM.
ACCELERATING
At the same time, trading volume in the securities market hit new highs, with the overall average daily turnover of the Main Board and GEM increasing by 26 per cent year-on-year.
This is accelerating. The overall average daily turnover for the first three months of this year increased by 144 per cent year-on-year, and in February a company graduated from GEM to the main board.
“The HKSAR government is actively working to attract more mainland and overseas strategic enterprises, family businesses, and private equity funds, to establish headquarters, operations and R&D centres in Hong Kong,” said Edward Au of Deloitte China. “This initiative could create a fresh pipeline of IPO candidates, especially in the technology and innovation sectors.”
STREAMLINED
The HK Securities and Futures Commission and the exchange are taking forward a comprehensive review on reforming the listing regime, with streamlined rules to be announced before the end of the year.
Already, companies seeking a share market listing are offered a 28-day turnaround between applications, processing and response.
Hong Kong has long been a low-crime city with a hardworking population who were world-class players in finance and trade, but has been suffering in recent years by hostile political manoeuvres aimed at mainland China.
Yet the US and Chinese financial communities do not share the divisiveness we see from politicians and journalists. So far this year, 21 Chinese companies launched IPOs in the US, and China’s ultra-creative tech sector is attracting investment from the US.
Image at top by Fridayeveryday.