Author: Ren Xiaoning
On January 20, baidu returned to Hong Kong to launch its second listing. Baidu did not respond to the news to the economic observer. According to the news, Baidu has identified Goldman Sachs and CITIC as its listing recommendation team, and plans to formally submit its listing application in Hong Kong after the Spring Festival. If Baidu returns, it means that all three big bat companies will be listed in Hong Kong stock market.
It is not only Baidu that has heard the news of the second listing. Tencent music, auto home, huanju group, B station and Ctrip group will also return to Hong Kong for the second listing. The last wave of going back to Hong Kong for listing was in June last year. At that time, Jingdong, Netease, yum China, Zhongtong express, Huazhu group and other companies had completed the secondary listing of Hong Kong stocks.
Last year, the industry believed that the wave of secondary listing of China capital stock would last until the first half of 2021. At present, the trend of a large number of Chinese capital stocks listed in Hong Kong also confirms this view. Chen Zunde, general manager of Fande investment, told the economic observer that for companies, the second listing is an opportunity to increase the market value, has a certain role in promoting future development, and for Chinese companies, it can also avoid the risk of US policy changes.
“This wave of companies listed in Hong Kong this year reflects a new word.” Zhang Xiaorong, director of the deep science and Technology Research Institute, said he said that besides the upcoming stock return companies, there are many new faces to be noticed this year, including Kwai Fu, Jingdong logistics, drip and byte beating, all of which are promising new companies in the capital market.
The continuation of the return tide
In May 2020, Robin Li expressed the consideration of Baidu’s two listing in Hong Kong. In July of that year, baidu launched the plan of listing in Hong Kong. On January 20, 2021, Baidu, which has delayed the plan for many times, is finally ready to formally submit an application, and plans to raise at least $3.5 billion.
On January 13, Tencent music reported that it was considering a second listing in Hong Kong and planned to raise $3.5 billion. Huanju group also reported that it was preparing to go public for the second time. The target financing is about half of Tencent music. After the news, Tencent music rose more than 2% overnight, huanju group rose 4.26%. Last week, station B also reported the news of its second listing, saying that it had been listed in the form of confidentiality, and initially planned to raise shares in March, with the amount of financing increased from US $2 billion to US $2.5 billion to US $3 billion. Station B declined to comment on the message. B station and Baidu’s share prices have continued to rise in the near future.
Many factors influence the regression of Chinese capital stock. Zhang Xiaorong told reporters that there are three main influencing factors: first, the US foreign enterprise Accountability Act affects all Chinese capital stocks; second, the US government has imposed sanctions on some Chinese technology companies, forcing them to withdraw from the market; third, the companies think their performance is not reasonably recognized, so they switch to the Hong Kong market for refinancing.
Chen Zunde believes that secondary listing is a mutual choice between the capital market and enterprises. With the return of Alibaba, a large number of companies have seen the vitality of the Hong Kong market and the opportunity of price discovery in the secondary market. For companies, the second listing can provide more flexibility in operation.
Compared with last year, this year’s trend of return is more continuous. In terms of market value, the number of companies returned last year is relatively large. The market values of Alibaba, Jingdong and Netease are all larger than those planned to return this year. “The smaller China capital stocks have no strong desire to return to Hong Kong stocks, or capital to return to Hong Kong stocks.” Chen Zunde said. Companies with poor performance after listing in the United States have no way to go back to the Hong Kong stock market.
The returning enterprises also need to bear certain risks. Under the impact of international politics, foreign investors have to withdraw, and the stock price of China capital stock company is facing the risk of shrinking, which may have a certain impact on the valuation and pricing of Listed Companies in Hong Kong.
The vitality of the Hong Kong Stock Exchange
Last year, Netease’s second listing raised more than HK $20 billion, and Jingdong’s second listing in Hong Kong raised HK $29.8 billion. During the period of centralized secondary listing, Hong Kong stocks showed resilience and vitality.
According to the statistics of wind, in 2020, the IPO scale of Hong Kong stock will reach HK $397.528 billion, reaching a new high. The IPO market of Hong Kong stock is also second only to the US stock market and A-share market, ranking third in the world. Among the top 10 IPOs of Hong Kong stocks, the return companies of China capital stock account for 6 seats.
The return of a large number of technology companies this year will also have a certain impact on the weight ratio of Hong Kong stocks. Chen Zunde told reporters, “in the past, Hong Kong stocks were dominated by traditional financial real estate, and will gradually become dominated by technology stocks, which is conducive to the growth of Hang Seng Index.”
Previously, Chinese technology companies like to focus on listing in the United States, “most of the companies listed in the United States, the U.S. capital side is not particularly familiar with.” Chen Zunde explained that the valuation of companies listed in the United States is mainly based on their understanding of domestic funds, and there is the possibility of speculation. After entering the Hong Kong stock market, the market value of local listed companies can be better reflected. Therefore, the return of Hong Kong stocks is an opportunity for companies to explore the local market, and listing in China will also get the pursuit and activity of funds.
After Netease’s second listing last year, the total amount of subscription during the public offering period was nearly HK $500 billion. The international offering for institutional investors received 14 times of subscription, while the Hong Kong public offering for retail investors received 360.53 times of subscription, setting the highest subscription record among Internet companies listed on the stock exchange of Hong Kong at that time.
The companies that returned this year have also been sought after recently. Due to the continuation of the tide of returning to Hong Kong, the competition among Listed Companies in the same period and the size of the company, Zhang Xiaorong believes that the fluctuation caused by the return of the company this year may not be as large as last year.
The inevitable trend of China capital stock
Since the return of Alibaba, Jingdong and Netease last year, a new round of return of China capital stocks has been set off. At present, it is inevitable that more Chinese capital stocks will return to Hong Kong stocks instead of A-shares.
“There is a factor that can not be ignored in the return of China capital stocks to a shares, that is, they may use foreign exchange reserves.” Zhang Xiaorong told reporters that the return of zhonggai shares to a shares requires the use of funds to privatize the market, then dismantle the vie structure and return to the domestic listing. If the overseas income is not enough to cover the repurchase cost, it needs to exchange. However, if these companies are accepted by Hong Kong stocks, it is unnecessary to involve the use of foreign exchange reserves.
At present, the U.S. capital market is still the first choice for domestic enterprises to go public for fund-raising. When enterprises are unable to go to the U.S. for IPO, they can consider the Hong Kong stock market and A-share market. However, the capital scale of Hong Kong is smaller than that of the United States. The total market value of Hong Kong’s stock market is only 1 / 30 of that of the New York Stock Exchange and 1 / 4 of that of NASDAQ. The annual turnover of stocks is also lower than that of the United States.
Chen Zunde believes that in the future, “A shares + Hong Kong shares” will become a better choice for Chinese companies, “and there will be no case that everyone will never go to the United States for listing again. The choice of listing location is a judgment made by different enterprises based on different needs.”.
Judging from the trend of last year’s return of China capital stocks, the return of big Internet companies can bring about a great improvement to Hong Kong stocks, which is also an opportunity for Hong Kong stocks to broaden the market, absorb capital and optimize the weight. This time, the stock prices of several companies that are about to return to China have continued to rise recently, which also reflects the optimistic outlook of the capital market. However, it is still unknown whether the companies returning this time can reach the height of last year.