Hong Kong will surpass the Nasdaq as the world’s largest biotechnology stock trading and fundraising centre within the next five to 10 years as Chinese scientists dominate research in the field, according to bourse operator Hong Kong Exchanges and Clearing (HKEX). “There is no question we are one of the only two real global biotech [equity fundraising] centres,” chief executive Charles Li Xiaojia said at the HKEX Biotech Summit on Tuesday. “I’m sure, in the next five years, 10 years, or at some future time, we will be number one.” Chinese scientists are massively racing ahead in sector after sector in life sciences, Li said. “They are standing among the best and brightest around the globe,” he added. “There is no reason why they will not bring us to the top of the world.” The bold prediction follows a hectic year in which HKEX has attracted a slew of Chinese-backed biotechnology listings, helping to propel Asia’s third largest capital market to among the top venues for initial public offerings (IPOs). The quest builds on Li’s listing reforms in April 2018 that opened the door for such companies, including drugs developers to sell shares to the public without prior revenue or earnings track record. So far 20 stocks have gone public under the regime, while 12 more are in the IPO pipeline, said Christina Bao, HKEX’s head of global issuer services. Those that listed under the regime, including drugs and medical device developers, have performed well, she added. The 20 companies have seen about 70 per cent gain in their stock prices on average from their IPO prices, according to HKEX data. On a year to date basis, they rose by 40 per cent on average. Their combined average daily turnover has surged to HK$1.4 billion (US$180 million) so far this year, compared to HK$270 million in the early days of its launch in 2018, HKEX’s head of markets Wilfred Yiu said. The stellar price gains contrasted with an 11 per cent decline in the Hang Seng Index this year, which can be attributed to rising health care spending in China, said Xu Chong, a partner at private equity firm F-Prime Capital. They were also aided by plentiful of c heap capital unleashed by ultra-loose monetary policies, Xu added. China has been labelled as the next biotechnology superpower. Under a series of industry reforms to fix its creaking health care system, the sector has attracted massive private and public funding and lured returning expatriates to help propel it into the world’s second-largest biopharmaceutical market with US$137 billion in sales in 2018, according to a November 2019 report in Nature Biotechnology Journal. Chinese companies’ near-term focus is on unmet needs of the country’s aging population. Its long term plan was spelled out in 2015 by President Xi Jinping in his ‘Made in China 2025’ strategy for global leadership in the sector. Li, former chairman of a JPMorgan unit in China, said its decision to let market forces run the scheme was the key to its early success. “At the beginning there was a lot of fear, my heart was in the air for months when the initial transactions were done in ways that was disappointing because of valuation, timing,” he told participants at the summit. “We have overcome our internal desire to proactively intervene. We allowed the market to go on its own way, at its own pace.” Li has in the past expressed confidence in Hong Kong’s potential as a centre for biotech listings. A month before the April 2018 reforms, its biggest in decades, he set a goal of overtaking Nasdaq within five years in the number of listings of mainland Chinese biotechnology firms and their market capitalisation. HKEX to offer MSCI derivatives, replacing Singapore as index provider’s Asia derivatives hub Greater availability of derivative products and inclusion of some of the 20 stocks into the Hang Seng China Index will further boost trading volume of these stocks, he said. Companies listed under the pre-revenue biotech regime and their investors are benefiting from the initiatives, head of markets Yiu added. HKEX in May signed an agreement to license a suite of MSCI indices in Asia for the introduction of futures and options contracts in Hong Kong. Hang Seng Indexes Company, the index-compiling firm, last December launched the Hang Seng Hong Kong-listed Biotech Index, whose members include 42 drug and medical devices developers, producers and distributors. Last month, it added nine companies to the Hang Seng Composite Index, a broader market gauge that tracks 485 companies on the exchange. Their entry into the Composite Index is also a precondition for future inclusion to the Hong Kong- Shanghai and Hong Kong-Shenzhen Stock Connect schemes, paving the way for these companies’ shares to be traded by mainland investors, HKEX’s Yiu said.