Companies listed on the Chinese mainland are rushing to Hong Kong for new stock listings, spurred by appealing valuations, robust liquidity, and favorable policies. Contemporary Amperex Technology ' s (CATL) agreement set to be the largest of the year.
The Shenzhen-based company CATL, which leads globally in manufacturing EV batteries, is assessing investors' interest ahead of an anticipated $5 billion share offering this week. This comes following the approval granted by the Hong Kong Stock Exchange’s listing panel on Tuesday. If successful, this could become one of the biggest initial public offerings in Hong Kong recently. Kuaishou Technology secured $6.2 billion in funding from its initial public offering (IPO) in January of 2021 .
CATL is one of the 30 Listed firms on A-shares that have filed applications For H-share offerings in Hong Kong up until now this year, the number has exceeded last year’s total of 16, as per the most recent information provided by the Hong Kong Stock Exchange and industry research firms. According to a CGS International report issued in March, such listings have typically averaged about five annually between 2016 and 2023.
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According to Securities Daily, a state-run news agency, as many as 46 A-share firms intend to go public in Hong Kong this year. This was reported on Tuesday.
On Wednesday, Wu Qing, who heads the China Securities Regulatory Commission (CSRC), stated that the regulatory body plans to simplify the documentation process and procedures for overseas listings. This move aims to boost both the quality and efficiency of these processes, thereby reinforcing Hong Kong’s position as a leading global financial hub.
Regulatory backing is anticipated to boost the A-to-H listing trend even more, complementing the CSRC’s initiatives introduced in April 2024 aimed at facilitating initial public offerings for top-tier Chinese firms in Hong Kong. This also follows the HKEX's statement in October about streamlining share sales for companies listed on China's main stock exchanges.
At the same time, reducing price discrepancies between Hong Kong and mainland stocks is expected to be advantageous for Chinese firms looking for higher valuations in the region.
The difference in prices between the two markets has decreased by 6.8 percent so far this year, as stated by the Hang Seng Stock Connect China AH Premium Index. At present, the index stands at 135.25, reflecting a 26 percent weighted average discount for H shares compared to A shares.
"The gap between A shares and H shares has significantly shrunk, with the H-share discount being less noticeable compared to previous years,” stated Jason Chan, senior equity strategist at Bank of East Asia. “This situation renders Hong Kong’s fundraising opportunities more appealing for firms from mainland China, particularly since regulations remain stringent domestically.”
He mentioned that Chinese businesses were drawn to Hong Kong due to the swift rebound of its market, which recovered faster compared to those on the mainland.
Up until now this year, the city’s mainHang Seng Index has surged almost 13%, whereas theCSI 300 Index, representing the top 300 stocks in both Shanghai andShenzhen, has dropped by about 3.2%.
It is anticipated that the substantial capital inflow from mainland China into Hong Kong-listed equities will have a positive impact on prospective IPO contenders.
During the initial four-month period of this year, the average monthly capital influx via the southbound leg of the Hong Kong-Shenzhen Stock Connect amounted to approximately RMB 143 billion ($19.8 billion USD). This figure represents roughly twice the monthly average from the previous year, as reported by financial information firm Wind Information. In a recent projection released last month, Goldman Sachs predicted that net southbound flows might increase by about half to reach $110 billion USD for this year.
"In light of the somewhat unstable global market conditions, businesses, financial organizations, and investors have boosted their investments in Hong Kong dollar-denominated assets," stated John Thang, who leads markets and strategic client management and solutions at Standard Chartered, on Wednesday.
He pointed out that this situation has once more underscored Hong Kong's role as an international financial hub.
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