With the global crown as world’s No. 1 fundraising hub in its sight, Hong Kong stock exchange is chasing transaction volume
- HKEX faces headwinds including a fall in trade volumes amid Hong Kong’s political crisis, and more competition for listings from mainland Chinese exchanges
- The exchange is on course to secure the No. 1 spot globally for fundraising for the seventh time in 11 years, but that doesn’t guarantee plain sailing, say analysts
Now that it is on the cusp of regaining the crown as the world’s leading initial public offering (IPO) market, the Hong Kong stock exchange is counting on some of its biggest stocks to attract sufficient trading to stave off competition from mainland bourses.
That may be a tall order, as trading activity wanes amid political turmoil and mainland Chinese exchanges ramp up their efforts to keep listings of China’s fastest-growing companies in their home markets.
Hong Kong Exchanges and Clearing Limited (HKEX), which runs Asia’s third-largest stock market, is on course to secure the coveted No. 1 spot for fundraising for an impressive seventh time in 11 years. The city is leading the world in fundraising this year, thanks largely to last month’s US$12.9 billion secondary offering of Alibaba Group Holding, owner of the South China Morning Post. In all, 131 companies have raised a combined US$37.2 billion in the embattled financial hub, according to figures from data provider Dealogic.
The Nasdaq and the New York Stock Exchange are ranked second and third, while Saudi Arabia’s Tadawul exchange has leapt into fourth place from 25th following the US$25.6 billion sale by Saudi Aramco in the world’s biggest ever IPO. In terms of IPOs and first time listings, Hong Kong is also ranked top with the Saudi bourse in second place, according to data tracker Refinitiv.
Bulls including Haitong International Securities see HKEX as a long-term bet. They point to a cross-border investment channel linking Hong Kong and the mainland, known as the Stock Connect, that started in 2014, as a catalyst for the share price.
“I think the company has good long-term prospects,” said Kevin Leung, executive director of investment strategy at Haitong International. “A shares are likely to perform well next year, so more people will be buying them through the Stock Connect, which is a good thing for HKEX.”
The Stock Connect, which gives overseas traders access to an array of the mainland’s shares through HKEX, gained more popularity this year when index provider MSCI raised the weightings of the stocks in its global benchmarks three times to spur more foreign inflows. Net buying of Chinese stocks by foreign investors has exceeded 300 billion yuan (US$42.6 billion) in 2019, and is poised to surpass the total for the whole of last year.