Allowing international issuers on Stock Connect brings opportunities for Asean companies: HKEX CEO

THE planned inclusion of international issuers on the Stock Connect between Hong Kong and mainland China is a “major breakthrough” and opens opportunities for companies in South-east Asia, said Hong Kong Exchanges and Clearing (HKEX) chief executive Nicolas Aguzin.

Speaking to reporters in Singapore on Tuesday (Nov 15), Aguzin noted that international companies listed in Hong Kong would have the opportunity to tap on both international and mainland China investors, which could be advantageous.

The Stock Connect trading link between mainland China and Hong Kong, which launched in 2014, allows investors to trade and settle shares listed on the other market via the stock exchanges and clearing houses in their home market.

The proposed inclusion of international companies in the Southbound Stock Connect, which was announced in September this year, would allow retail investors in mainland China to buy international stocks in Hong Kong.

Aguzin noted that there are currently 106 companies from South-east Asia that are listed in Hong Kong. 

“But that was with the old regime. With the new regime that’s coming in place next year that allows international companies to actually be part of Stock Connect, that’s a completely different thing,” he said.

“When companies listed in HKEX historically, they do it for just the international investor base, which is great,” he said. “But you couldn’t access that domestic investor base.”

Going forward, companies would be able to tap on both pools of investors, which could benefit companies, as investor sentiment may vary between international and mainland China investors at different points in time, Aguzin said.

“Having this uncorrelated investment base is very, very important and a huge competitive advantage,” he added. 

He noted that new economy companies have accounted for the majority of listings on the exchange since listing reforms were introduced in 2018, with two-thirds of capital raised in initial public offerings (IPOs) coming from such companies.

The exchange is currently in the process of consulting on a new specialist technology regime to enable the listing of companies that are primarily engaged in research and development of certain innovative technologies such as artificial intelligence, quantum computing and autonomous driving.

Such companies may be pre-revenue, but still require investments to develop. Aguzin noted they did a similar move for biotech companies in 2018, and over 100 such companies have carried out an IPO, raising over HK$100 billion (S$17.5 billion) since then.

“We want to do the same thing with this specialist technology framework,” he said. “What we’re creating is a mechanism...to try to make sure that we can attract those companies.”