19 new-economy firms raised HK$115.8 billion in Hong Kong in the first nine months, more than double the HK$53.8 billion raised by 17 companies in New York, according to HKEX data<\/b>
\nSix months after pushing through the biggest change in Hong Kong\u2019s listing rules in three decades, what has the Hong Kong Exchanges and Clearing (HKEX) gained?
Its stock price has plunged nearly 19 per cent since April 30 when the reform kicked off, losing HK$60.53 billion (US$7.72 billion) in value.
When HKEX chief executive Charles Li Xiaojia touted the success of the listing reforms that the exchange operator had pushed through with the city\u2019s securities watchdog agency, he described it as the biggest game-changer since 1993, when Chinese companies were able to raised capital in Hong Kong through H shares.
\u201cIt will not be in the single digits – more than a dozen companies will apply\u201d to raise capital in Hong Kong, Li said at the time.
The reform opened the way for tech companies with weighted voting rights – commonly known as dual-class shares – and pre-revenue biotech firms to raise capital.
Six months later, Hong Kong\u2019s key stock index is in bear market territory, interest rates are up, and the appetite for raising capital has shrunk. As many as 19 so-called new-economy companies raised HK$115.8 billion in Hong Kong in the first nine months, more than double the HK$53.8 billion raised by 17 companies in New York, according to the HKEX data.
While that was enough to help Hong Kong reclaim its crown as the world\u2019s favourite market for IPOs, it could not have come at a worse time. The market is down, which means most of the companies are trading below their IPO prices, and that has scared other companies away from raising funds.
Four of the five companies that did list under the new rules, including the world\u2019s fourth-biggest smartphone maker Xiaomi, either had a flat trading debut, or fell on their first trading day. Online food delivery Meituan Dianping was the only company to debut at a premium, according to Bloomberg data.
Even long-term investors had their fingers burnt, as these five stocks had fallen by between 20 to 56 per cent below their IPO price.
\u201cThis is definitely a disappointing set of results for the listing reform,\u201d said Christopher Cheung Wah-fung, a veteran stockbroker who is also Hong Kong\u2019s lawmaker representing the financial services constituency. \u201cThe number of new listings under the new regime is far fewer than expected. These stocks are not performing well, and investors have lost money. The benefit of the listing reform is far less than anticipated.\u201d
The failure with Hong Kong\u2019s listing reforms wasn\u2019t merely the plunging stock prices, but the fact that the city remains the go-to market for Chinese companies, but not anyone else, said Kenneth Leung Kai-cheong, a lawmaker who represents accountants.
\u201cThere are many tech companies in the US, Israel, Singapore that need to raise funds,\u201d Leung said. \u201cThe HKEX should encourage these companies to list here, to diversify our source of listing beyond just mainland China.\u201d
Li could not be reached to comment. An HKEX spokesman said the exchange is \u201cvery encouraged\u201d by the interest in Hong Kong\u2019s new listing regime.
\u201cSince HKEX\u2019s listing reform, Hong Kong has overtaken the US to become the listing venue of choice for China\u2019s new economy companies,\u201d the spokesman said, adding that there are nine biotech firms and another two dual-class companies that are in the queue to raise money in Hong Kong. \u201cIt is early days but the progress so far is good.\u201d<\/p>\n