The Hong Kong stock exchange received a massive punch to the gut when Ant Group’s highly anticipated IPO was shelved. Said IPO was set to make history with record breaking numbers. However, despite this setback, the city is still on track to end 2020 as one of the world’s top markets for public offerings thanks to Chinese companies raising cash.
The Asian financial hub has hosted more than 120 new listings so far this year, according to data compiled by Dealogic. The research firm also said that the listings have raised a combined US$47 billion through Tuesday (8 December 2020), the third highest tally in the world behind the New York Stock Exchange and the Nasdaq.
A prominent winner among the companies is JD Health, an online healthcare unite owned by Chinese e-commerce player, JD.com (JD). The company’s shares popped 56% on the first day of trading Tuesday. The firm has raised at least US$3.5 billion, making it the city’s largest initial public offering this year.
Such success is undeniably good news for the city, which has had shadows of doubt cast on its future as a global business hub as mainland China tightens its control over the city.
Hong Kong financial secretary Paul Chan acknowledged this week that international investors have been worried about the city’s future. But he also said that the government has been working to shore up confidence in the city, and intends to work with regulators to promote Hong Kong to international investors.
Overall, “foreign investor confidence has maintained well in Hong Kong,” Chan said during a legislative meeting earlier this week. He added that the city has recorded a net inflow of nearly US$50 billion in capital since April.
Overall, there has been a noticeably large amount of Chinese public offerings this year, particularly among those that already trade overseas but want stronger roots closer to home. Many Chinese companies that trade on Wall Street, such as Alibaba, NetEase, and JD.com, have been holding secondary offerings in Hong Kong, mainly as a precaution against the rising trade tensions between Washington and Beijing.
Despite this, there are still plenty of risks that the financial hub may face in the future. Société Générale analysts noted this week that Chinese stocks are facing significant headwinds because of US sanctions on their businesses that could cut them off from key technology or otherwise curtail investment. Trade hostilities between the US and China will certainly continue to have an impact for the foreseeable future; thus companies are advised to keep this in mind while planning ahead.
