Hong Kong Stock Exchange

Janus Henderson chief insists dual-class listings in Hong Kong must have solid corporate governance standards

Global fund manager throws weight behind largest listings shake-up in city for three decades

PUBLISHED : Sunday, 01 April, 2018, 6:45pm
UPDATED : Sunday, 01 April, 2018, 10:58pm

Hong Kong’s new listing reforms, due to kick-start later this month, are likely to attract more technology firms to list on its stock exchange – but only as long as the authorities can provide appropriate investor protection measures, the head of leading global fund manager Janus Henderson Investors has cautioned.

Hong Kong Exchanges and Clearing (HKEX), which runs the stock exchange, is now in a race with counterparts in mainland China, Singapore and the US to compete for new technology listings.

In what’s expected to be the largest listings shake-up in Hong Kong for three decades, dual-class shareholdings are likely to be included for tech and biotech companies without strict requirements on revenues and profit.

Securities commission backs introduction of dual-class shares on Hong Kong stock exchange

Such a structure will allow one class of shareholders to own more voting right than others, an arrangement favoured by many founders keen to maintain control while still holding minority stakes. 

The move comes after more than two years of consultation, and remains controversial, however.

While HKEX and many tech firms want to change the rules to allow them to list here, many fund houses oppose the change as they would violate the city’s long-held “one share, one vote” principle, and may hurt the interest of minority investors.

Major UK investor Aberdeen Standard Investments, for instance, does not favour these kinds of company listings, due to corporate governance concerns.

While Hong Kong Investment Funds Association, the fund industry’s controlling body in the city, has also called on HKEX to require dual class shareholding companies to appoint more independent board directors, to safeguard the interests of fund companies.

But Andrew Formica, Janus Henderson’s co-chief executive, has now come out and said his company would invest in these companies, but only with the caveat they have good corporate governance standards.

Will the introduction of dual-class shares in Hong Kong boost Chinese tech shares listed in US?

“[Investing in] technology companies is a fast growing market in the US and Europe,” Formica said in an interview with South China Morning Post.

“What’s important is that HKEX and the regulators introduce measures to protect the interests of [all] investors, who are [taking a share] in these tech companies.”

What’s important is that HKEX and the regulators introduce measures to protect the interests of [all] investors, who are [taking a share] in these tech companies
Andrew Formica, Janus Henderson Investors’ co-chief executive

He said his fund house had invested in some US-based dual class shareholding companies now listed, and would again in future, only “if the managements can show they are adopting good corporate governance standards for small shareholders”.

Janus Henderson was created by the merger of Janus Capital Group and Henderson Global Investors in May last year, which expanded its footprint with managers investing across stocks, bonds and other alternative assets classes. 

Headquartered in London and dual-listed itself in New York and Australia, Janus Henderson has US$344.9 billion worth of assets under management, more than 2,000 employees and offices in 27 cities worldwide. Its Asia-Pacific assets under management had risen to US$58 billion by the end of last year, and it has 200 staff in Hong Kong, Beijing, Taipei, Singapore, Tokyo, Sydney and Melbourne.

Formica said after the merger, it has more resources to develop its new technology investment portfolio, and certainly aims to expand further in Asia and China.

“Asia has a huge population and fast economic growth,” he said. “There are a lot of customers who have growing demand for investment services in the region.”