Pain spells gain for HK
Updated: 2015-07-10 07:52
By Luo Weiteng in Hong Kong(HK Edition)
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With the China Securities Regulatory Commission (CSRC) announcing a halt to new share issues, an array of US-traded mainland companies may reschedule offers to delist while Hong Kong's initial public offering (IPO) market may be set for another yearend rush.
The mainland securities watchdog moved to freeze new share offers in bid to encourage investors to keep their cash in existing stocks, with some 28 companies declaring at the weekend their intention to scrap IPO plans.
It marks the ninth time that the central government has suspended new IPOs since July 1994 and 18 months since its last overhaul.
Previous IPO bans have lasted as little as three months and as long as 14 months, with the average at seven months.
During three out of the past eight halts, the benchmark Shanghai Composite Index lost between 8 percent and 14 percent.
The mainland stocks rout of the past week also dealt a blow to US-listed mainland concept stocks.
Internet companies including microblogging site Weibo Corp, software provider Xunlei Ltd and online game operator Changyou.com Ltd tumbled more than 12 percent on Monday.
With the A-share market reeling from a spell of extreme volatility, Hanna Li Wai-han, a strategist at UOB Kay Hian (Hong Kong) Ltd, believes a raft of Chinese mainland concept stocks may see plans to relist back home somewhat gummed up.
A record 27 companies, including Internet security firm Qihoo 360 Technology Co and social networking app Momo, have received offers to delist in the US since the beginning of the year, as they aim to return to mainland exchanges to fetch higher valuations.
Many of the non-binding offers will likely be canceled after the CSRC suspended local IPOs over the weekend to underpin the weak market, JL Warren Capital said in a note Sunday.
But it would take a quite while for mainland concept stocks to go private, break up variable interest entity structures and finally put A-share market listing plans on the table, Li told China Daily.
"Therefore, some of them may not be so much in a hurry or have yet to be geared up to go public in the A-share market right now," said Li.
What these hopeful returnees are betting on is definitely not the A-share market of now but on what it will be like in one or two years' time, Li added.
The good news is that the regulators warmly welcome moves by US-listed mainland companies to list at home.
Even when the Shanghai Composite Index plunged 7.38 percent on June 26, CSRC Chairman Xiao Gang told a business forum in Shanghai that the domestic capital market must back the development of innovative tech companies.
As a mature and market-driven global fundraising venue, the Hong Kong stock market will benefit from the shelving of new share sales on the mainland, believe analysts.
According to a KPMG report, proceeds from IPOs in Hong Kong topped HK$129.4 billion ($16.7 billion) in the first half, the largest in the world during the period, with Shanghai coming in a close second.
As the epic freefall in the mainland stock market sparks fear and anger among investors, it will take time to restore confidence.
In that scenario, Hong Kong undoubtedly stands as an attractive and competitive fundraising market, said Ringo Choi Wai-wing, managing partner at Ernst & Young.
sophia@chinadailyhk.com
(HK Edition 07/10/2015 page8)