As China’s richest man, Wang Jianlin (王健林), prepares to delist his main commercial real estate company from Hong Kong, bankers expect more Chinese businesses to head back home, irked by the deep discount for shares listed on the territory’s stock exchange.
Hong Kong has been the most popular location for share listings from Chinese state-owned and private enterprises for three decades, making it the world’s leading destination for initial public offerings (IPOs).
Chinese companies have long been drawn by Hong Kong’s standing as a global financial hub, stable legal regime and large pool of institutional investors, but the downside of those benefits is a much lower share price than they could achieve on mainland bourses.
Over two-thirds of shares listed in both Hong Kong and China trade at a premium of more than 50 percent in the mainland, according to a UBS research report. That gap has substantially widened since 2014, making it less appealing for companies to raise secondary funds in Hong Kong.
The premium arises because of restrictions on capital flows to and from China, which create artificially high demand for local stocks. That demand has risen as alternative investments such as real estate faltered in China’s slowing economy.
At least 10 Chinese companies with Hong Kong listings have unveiled plans to either delist, spin off assets and list them in China or sell a controlling stake to a mainland-listed company since November last year. There were only a handful of such deals in each of 2012, 2013 and 2014.
There were still nearly 30 Chinese companies that listed in Hong Kong over the same period, but those deals were much smaller, and IPO fundraisings fell 18 percent last year.
“Selected Chinese entrepreneurs will be tempted to delist their companies from Hong Kong if the AH premiums continue at these high levels,” said Prashant Bhayani, chief investment officer for Asia at BNP Paribas Wealth Management, which oversees US$64.5 billion in assets.
UBS has identified 38 Hong Kong-listed Chinese companies with similar characteristics to those recently delisted, using criteria such as negative share price performance since listing, a forward price-to-earnings (P/E) multiple below 30 and where founders own more than 40 percent of the companies.
The top 10 companies in the UBS list have a combined market value of about US$40 billion, and eight belong in the property sector, including Country Garden Holdings Co (碧桂園) and Shimao Property Holdings Ltd (世茂房地產控股).
Shimao said it had no plans to delist from Hong Kong and was happy with its current structure, with a Shanghai-listed unit focusing on commercial property, while Country Garden said it studied “everything that can help with the valuation, to create better return for the investors.”
Since Wang’s Dalian Wanda Commercial Properties Co (大連萬達商業地產) announced its plans, China’s No. 2 listed developer, Evergrande Real Estate Group Ltd (恆大地產集團), bought a controlling stake in a smaller, loss-making rival listed in Shenzhen, the main attraction being its lofty valuations and access to China’s capital markets through the mainland listing.
“Property companies, when they go public in Hong Kong, one of the reasons is to be able to do foreign issuance [of bonds], have better credit rating and cheaper financing,” said Ringo Choi (蔡偉榮), Asia-Pacific IPO leader at consulting firm Ernst & Young. “But now, when you look at the bond market in mainland China, it’s getting more and more popular. So if you’re listed in the A share market, it’s very easy to issue bonds also.”
Listing fees remain a big part of Hong Kong Exchanges and Clearing Ltd’s (HKEX) turnover, accounting for a fifth of total revenue, up from a 10th a decade ago.
“How, when and where a company lists are commercial decisions determined by a wide variety of factors, but we are convinced that Hong Kong remains a very competitive listing center with many advantages,” HKEX said in a statement.
HKEX could also have a valuable ally in the China Securities Regulatory Commission, which on Friday said that it was concerned by the huge valuation gap between domestic and overseas stock and speculation on shares in shell companies, which can be used to repatriate overseas-listed companies.
The regulator has only said it is studying the issues, but if it takes action to address the gap or deter such re-listings, that could help avert, or at least delay, any day of reckoning for Hong Kong.
“Hong Kong will face competition from Shanghai and Shenzhen for hosting big Chinese companies, but we are not there yet,” BNP’s Bhayani said.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”