Red Capitals Flow in Hong Kong
- 82newsbulletin
- Sep 23, 2020
- 2 min read
Written by Victtoria Mingyang Ni
As the threat from the ongoing trade war and political battles becomes more imminent, Chinese companies that are listed in the American stock exchange feel pressured to swing the capitals back to the continent. From the TikTok sale to Huawei 5G ban, the future of the Chinese companies does not seem very bright. Last month, Aiqiyi started considering delisting from the NYSE. Many other Mainland-based capitals also rumoured to switch to other markets.
Undoubtedly, Hong Kong will be the most ideal destination due to its complex intertwining ties with the Mainland and its strong financial infrastructure. Chinese Investment banks such as CICC, CITIC Securities and Haitong will be the beneficiaries, as many Chinese companies are inclined to choose Chinese Investment banks for IPO services. “Inevitably, Chinese banks will account for an increasingly larger share of the fee pool [for IPO services]” said Philippe Espinasse, the former head of equity capital markets at Nomura.
Meanwhile, Ant Financial announced a dual-listing plan in Shanghai and Hong Kong. Ant Financial is the fin-tech arm of the Alibaba Group. "Together with Tencent, Ant processes some 200 trillion RMB (£22.5tn; $28.8tn) of payment and transfers annually. That's more volume than Visa and Mastercard combined."
This could be the largest IPO of all time, topping the $29 billion raised last year by Saudi Aramco. It is also a passive aggressive escalation of China-U.S. tensions, with Ant snubbing New York. Ant's IPO filing shows $3.2 billion of profits on $10.5 billion in revenue for the first half of 2020. The profit figure represents a year-over-year gain in excess of 1,000%, while revenue was up around 40%.
However, many scholars debated whether Hong Kong’s political instability will affect its economic status. The editor of Axios China, Bethany Allen-Ebrahimia said in an interview: “U.S. commentators keep speculating that Hong Kong can't last as a financial hub due to the Hong Kong national security law, but it's clear that China views things differently.”
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