Why Hong Kong is in a sweet spot to harness Chinese biotech listings
Biopharmaceutical firms from China and the wider region could be attracted by Hong Kong stock exchange’s relaxed listing rules, but there are fears the professionals needed to support such an ecosystem is not fully established
Hong Kong will be well placed to help biotech companies from China raise funds if the city’s bourse goes ahead with its plan to allow firms with no revenues to list, but it will take years before the city can become a credible investment centre for the emerging sector.
As such firms were not allowed to list in the past, there is concern that expertise and experience among local investors, research analysts, bankers and stock market regulators may not be sufficient to cope with the needs of the slew of new listings that will come once the floodgates are opened for biotech companies, industry practitioners said.
“Since Hong Kong hasn’t allowed pre-revenue biotech listings before, it takes time for the market to accumulate the knowledge and experience to become a real investment hub for the sector,” said Brian Gu, chairman of Asia-Pacific investment banking at JP Morgan, who has a PhD in biochemistry.
“It took the US equity market nearly 20 years to build up a sophisticated investor base for biotech firms … Hong Kong’s process will be shorter since markets are moving much faster nowadays.”
Hong Kong Exchanges and Clearing, the city’s bourse operator, last month said it plans to allow drug discovery firms that have yet to record any revenue to list as part of wider reforms to attract more firms in the technology and “new economy” sectors to raise funds in the city.