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Home / World / Alibaba could be listed in Hong Kong. Other Chinese companies could follow

Alibaba could be listed in Hong Kong. Other Chinese companies could follow



From the left you can see the flags of the Hong Kong Stock Exchange, China and Hong Kong fluttering on May 6, 2019 in the wind.

Anthony Wallace | AFP | Getty Images

Many large Chinese companies have for years decided to record in the US instead of Hong Kong or China. In a trade dispute between Beijing and Washington, a national champion could now go home.

Nearly five years after Alibaba broke its records with an IPO of $ 25 billion, the company plans to schedule a secondary listing in Hong Kong. Analysts told CNBC that other listed Chinese companies might consider doing so too.

"I think there will be more … Companies looking to return to Hong Kong because we really do not know what the US is going to do," said Kevin Leung, Haitong International Securities Investment Strategy Executive Director Kevin Leung.

The US and China were involved in a trade war that resulted in retaliation from both countries. Technology is one of the most sensitive issues at the center of the dispute. Washington blacklisted Huawei, while Beijing introduced a "list of unreliable companies" that identify foreign companies as a risk to Chinese companies.

"From what we have seen from Huawei and ZTE, the US definitely seems to have problems with China and technological advances," he said. ZTE, a key rival to Huawei, was forced to temporarily halt large-scale operations last year after Washington banned Chinese telecommunications giant 201

8 from buying US goods in April. Look at Chinese companies, basically they have a large portion of their own Business in China, "he added.

Companies with large market capitalization, stable earnings and well-known names or market leaders in China might consider this, he said in an e-mail to CNBC.

Leung quoted companies such as JD .com, CTrip and Baidu, all of which are listed on the Nasdaq in New York "Planted at least one foot into one of the Chinese stock exchanges" for the best possible valuation, said Gil Luria, research director of financial services firm DA Davidson. [19659002] "Uncertainty about raising capital in the West is increasing," he said, pointing out that d he review of Chinese stock market listing in the US is increasing.

Gil Luria

Research Director, DA Davidson

If I was a Chinese company already listed, I would think long and hard in the US or listing in the US

A group of legislators drafted a bill last month to force Chinese companies listed on the US Stock Exchange to stay in control of the trade conflict.

"Every time a Chinese listing is linked to fraud, it is the Securities Exchange Commission that is the deciding factor, so it is likely that they will be examined more closely, but it is also quite possible that we Enact laws, "he said.

"I would think long and hard whether I would be a Chinese company already listed in the US, or would I consider writing down in the US," added Luria.

Pull factors

Changes in the Greater China markets make it attractive for companies to list closer to home.

"Chinese investors are becoming more relevant in terms of capital and market understanding," Leung said of Haitong International.

Hong Kong or China listing allows these investors "easier access" as they do not have to deal with time differences and transfer capital to the US, he said, citing the example that some investors told him they wanted to buy stocks like Alibaba, "but they can not, just because they do not know how."

Companies used to be worried He added that the quality of domestic investors has diminished compared to international investors.

A more accommodative policy also means that listing in the region is now possible.

Last year, Hong Kong's stock exchange loosened It opened its doors to secondary listing and pre-revenue companies that wanted to take stock of the stock market. Companies can also issue dual-class shares.

Shanghai's new Nasdaq-based tech board – the Science and Technology Innovation Board or Star Market – was launched this week, allowing pre-profit companies to go public.

Early Chinese companies that were not "automatically" profitable sought an IPO on Nasdaq to meet listing requirements, said Mary Manning, Portfolio Manager at Ellerston Capital.

Charles Li, CEO of the Hong Kong Stock Exchange, told CNBC This month states, "For anyone traveling far away, there will be a time to come home." He said he was "reasonably confident" that overseas listed Chinese companies would release new deals in Hong Kong.

Stock Exchange Listings in the US vs. Asia

But not all analysts agreed.

Dickie Wong, Executive Director of Research at Kingston Securities, brushed off concerns about increased US control. He said America is "open-minded" to listings, and companies that comply with regulations and do legal things should have "no problem whatsoever".

While regulations in Hong Kong and China have improved, market conditions are unlikely to be favorable for secondary listing by any company, Wong added.

As an example, he cited the discarded listing of the Budweiser Brewing Company APAC, the business unit of Anheuser-Busch InBev in the Asia-Pacific region.

The original plan was to raise up to $ 9.8 billion and this would have been the largest IPO in 2019. The company had planned to list on the Hong Kong Stock Exchange on July 19 but eventually decided not to proceed and cited "several factors, including the prevailing market conditions".

"This is definitely a very bad thing for … the IPO for the Hong Kong Stock Exchange," Wong said. "This is a negative sign for the prospects of the Hong Kong stock market itself."

In the meantime, he said the US market is "very active" in terms of trading volume and has higher liquidity than Asian markets.

Wong However, this could make it harder to seek a secondary listing in Hong Kong and China, as they have to spend their shares at a higher price, which reduces their attractiveness for Chinese companies. Potential investors.

Timing is good for Alibaba as investors know the company well, Wong said.

"They may have even higher market capitalization after being listed in Hong Kong, but I do not think the market can support too many, like this one, Mega Secondary IPO offerings," he said. "I do not really believe so."

– Grace Shao, Evelyn Cheng and Reuters of CNBC contributed to this report


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