HONG KONG :
Firms in China introduced in half of equity capital raised globally this 12 months up to now, setting a record that highlights the financial system’s earlier revival from the COVID-19 pandemic, plus the diploma to which soured U.S. relations are turning Chinese firms homeward.
China-based corporations bought shares value $32.1 billion in January-June together with multi-billion-dollar secondary listings in Hong Kong, equal to 49.8% of worldwide choices, confirmed knowledge from Refinitiv. The complete for U.S. firms was $15.Eight billion.
“With massive liquidity injections by various governments (supporting virus-hit economies), I’m not surprised by the size of Chinese capital raised this year – and the trend may continue,” Li He, capital markets associate at Davis Polk, mentioned of China firms taking benefit of their early lockdown emergence.
China was hit by the novel coronavirus in December and was the primary nation to impose virus-prevention lockdown measures on particular person motion and enterprise exercise in late January. Markets started their return to normality in April.
Chinese fundraising has been helped by the recognition of Shanghai’s year-old growth-focused STAR Market, in addition to well-received preliminary public choices (IPOs) in Hong Kong and the huge secondary listings – together with the $3.9 billion raised by e-tailer JD.com Inc this month and $3.1 billion by video games developer NetEase Inc .
“For Chinese companies, both the Hong Kong and U.S. markets are getting back to normal,” mentioned Houston Huang, head of global funding banking for China at JPMorgan. “Market activity (deal volume) is much better than anybody expected at the beginning of the year.”
Escalating Sino-U.S. geopolitical pressure over points resembling commerce is broadly anticipated to immediate extra U.S.-listed Chinese firms to conduct secondary listings nearer to dwelling the place they’ll elevate funds in markets absent of anti-Chinese sentiment.
Companies contemplating a secondary Hong Kong itemizing embrace Yum China Holdings Inc and ZTO Express (Cayman) Inc , mentioned two individuals with direct information of the matter.
Neither Yum nor ZTO responded to requests for remark exterior of common enterprise hours.
Secondary offers are additionally growing investor curiosity in Hong Kong, a market with a status for internet hosting stodgy monetary and property teams quite than growth-focused tech corporations.
Li Hang, CLSA head of Greater China equity capital markets, mentioned the JD.com sale, on which his financial institution labored, was capable of win orders not simply regionally but additionally from Southeast Asia and Europe.
“If a company is looking at a secondary listing in Hong Kong, they need to be looking at gathering investors’ interest from not only from Asia, but also Europe and the U.S.,” Li mentioned.
Also of concern for Chinese firms are U.S. steps geared toward bettering the transparency of monetary disclosure however which conflict with the Chinese authorities’s reluctance to offer overseas entities entry to onshore information.
In May, simply weeks after former market darling Luckin Coffee Inc mentioned its gross sales had been falsified, the U.S. Senate handed a invoice that would pressure Chinese firms to delist if they don’t enable the Public Company Accounting Oversight Board to entry their audited accounts for 3 consecutive years.
Will Cai, head of U.S. regulation agency Cooley’s capital markets follow in Asia, mentioned the invoice spurred two of his eight Chinese shoppers with IPO plans to decide on Hong Kong over New York.
For some Chinese corporations, status continues to propel them towards a U.S. itemizing in spite of political wrangling and damaging sentiment towards Chinese firms following fallout from Luckin Coffee.
Chinese teams nonetheless managed to boost $1.7 billion by means of New York IPOs throughout 2020’s coronavirus-hit first half, versus $3.42 billion in January-June final 12 months.
The determine contains the $510 million raised by Kingsoft Cloud Holdings Ltd in early May in the primary main U.S. IPO because the coronavirus outbreak – and the primary since Luckin’s disclosure. Its inventory has since risen practically 60%.
“We were under lot of pressure because if this one had failed, basically the U.S. market could have potentially closed the door to all Chinese companies,” mentioned Huang at JPMorgan, a lead underwriter for the deal.