NetEase jumps as much as 10 per cent on first day of trading after completing secondary offering in Hong Kong
- NetEase follows Alibaba in adding to its US listing in Hong Kong
- Such secondary listings boost Hong Kong’s status as an international financial centre
Shares of NetEase, the world’s second-largest mobile gaming company, surged on the first day of trading in Hong Kong, underscoring investors’ penchant for the fastest-growing part of China’s economy.
The stock jumped by 6 per cent from its offer price to HK$130 at the close on Thursday after rising by as much as 10 per cent in intraday trading. That compared with the first-day gain of 6.6 per cent for Alibaba Group Holding, parent of the South China Morning Post, that completed its secondary offering in the city in November.
NetEase’s American depositary receipts (ADR) added 3.8 per cent to US$424.98, close to a record set on June 5, on the Nasdaq in overnight trading, extending its gain to 39 per cent this year. Each ADR represents 25 Hong Kong-traded shares.
The stock’s closing price implied a 1.1 per cent discount to the ADRs.
“Hong Kong’s economy used to lack such new-economy shares,” said Banny Lam, managing director at China Everbright Bank International Investment in Hong Kong. “Now the return of big ones will further diversify the Hong Kong market and consolidate the status as an international financial centre.”
Investors’ appetite for new shares have been revived, as unprecedented monetary and fiscal stimulus measures by global central banks stoke demand for risk assets, propelling US stocks to near their record highs and reversing an epic fall in crude oil futures. Hong Kong’s Hang Seng Index rose for seven straight days through Tuesday, capping its longest winning streak in 14 month.
NetEase’s Hong Kong listing came amid the fraying ties between Beijing and Washington, heightening expectations that more US-traded Chinese companies will float shares in the former British colony for secondary listings. The US last month passed a legislation that could lead to the delistings of Chinese companies trading in New York or the Nasdaq.
The return of such mainland companies will also help restore investors’ confidence in Hong Kong, whose status as a financial hub has recently been called into question after Beijing’s passage of a security-law bill led to resurgence in the anti-government protest in the city.
“US scrutiny of the listings of the mainland-based companies will tend to be stricter,” said Avis Mak, head of investment advisory at brokerage Shenwan Hongyuan Group. “Listing requirements in Hong Kong have also relatively been relaxed to give them more room for return. It will be a trend in future” that more US-traded Chinese companies will choose Hong Kong for secondary flotations.
JD.com, China’s second-largest e-commerce operator that rivals Alibaba, is expected to start trading in the city on June 18. It will raise about HK$30 billion from the secondary offering after pricing the stock at HK$226 each, the Post reported.
More than 200 Chinese companies currently trade on US stock exchanges, with US$1.2 trillion in estimated capitalisation, Bloomberg data showed. A list of 32 issuers of ADRs may qualify for secondary listings in Hong Kong, according to China Renaissance.
NetEase is the fourth-largest among those companies, capitalising at US$55.4 billion, after Alibaba, JD.com and Pinduoduo. The Guangzhou-based company, controlled by billionaire William Ding Lei, was founded in 1997 and listed on the Nasdaq three years later.
Ding has personal wealth of US$24.6 billion, the sixth-richest businessman in China, according to Bloomberg data.
