Editorial | Time is ripe for Hong Kong exchange to represent new economy drivers
- If given the green light, a proposal by local bourse to change the IPO rule on corporate share ownership will enable the likes of New York-listed Tencent Music and online learning company Youdao to make their ‘homecoming’, triggering another wave of re-listings and IPOs
There is, therefore, an urgency to address the new environment created by trade disputes and geopolitical tensions between the United States and China. A chief challenge is to further reform listing rules to attract more innovative mainland companies, especially in hi-tech, biotech and medical services, without compromising on company quality and investor protection.
Following bourses in the US and Singapore, the Hong Kong exchange wants to change the IPO rule on corporate share ownership, which bars such shareholders from owning more voting rights than other investors. This follows a major listing amendment in April 2018 by allowing companies with multiple classes of shares, that is, those with different or no voting rights at all, to sell shares in Hong Kong. The reform was the most far-reaching in decades and sparked a wave of secondary listings led by Alibaba and JD.com.
The proposed listing reform is a step in the right direction, and if given the green light, will enable the likes of New York-listed Tencent Music and online learning company Youdao to make their “homecoming”, triggering another wave of re-listings and IPOs. Like Alibaba before them, they will help to entrench Hong Kong as the primary fundraising hub in the region along with Shanghai.
Since the 2018 listing overhaul, 99 new-economy companies and biotech firms have joined the exchange, raising HK$390.5 billion (US$50.38 billion). They now account for 23 per cent of Hong Kong’s market capitalisation and 15 per cent of average daily turnover. Meanwhile, 64 companies raised a combined HK$92.8 billion in Hong Kong in the first half of this year, up 29 per cent from last year. That has made Hong Kong the second most popular listing destination.
Not all of them are in the ranks of Alibaba, Xiaomi, Meituan, NetEase, JD, and now Ant Group – an offshoot of Alibaba – which is expected to pull the biggest IPO in history by simultaneously listing in Hong Kong and Shanghai next month. But many biotech firms have quietly plodded along and raised capital, and their likes will likely account for much of the future growth prospect for the exchange. The time is ripe for the Hong Kong exchange, long dominated by banks and developers, to represent the new economy drivers.