HK bourse in talks with US-listed Chinese tech firms over secondary listings

Hong Kong

HONG Kong Exchanges & Clearing Ltd is discussing secondary listings with Chinese technology companies, including Trip.com Group Ltd and Netease Inc, after Alibaba raised US$13 billion in its 2019 share offering in the city, say people familiar with the matter.

Bourse officials have held follow-up talks with the two US-listed firms about the possibility of a secondary share sale, the people said, requesting not to be named because the matter is private.

The discussions are preliminary and subject to change, they added.

Hong Kong Exchanges & Clearing Ltd said it has received a spike in inquiries about secondary listings from Chinese firms. The interest comes at a time when US scrutiny of Chinese companies has intensified. A decision to proceed would see China's biggest online travel service provider and second-biggest gaming company - with a combined market value of about US$60 billion - follow in the footsteps of Alibaba Group Holding Ltd, which last year pulled off the financial hub's largest equity offering since 2010.

Hong Kong Exchanges' shares rose 2.9 per cent on Thursday, their biggest gain in nearly four months.

Trip.com, known also as Ctrip, climbed 10.2 per cent to mark its biggest rise since March. And Netease's stock surged 7.2 per cent, the most since August, helped by a rally in Chinese technology stocks listed in New York.

Ctrip and the Hong Kong exchange declined comment in e-mailed statements. A Netease representative had no comment when contacted.

Alibaba's share sale was a triumph for Asia's largest stock exchange operator, which has lost many of China's brightest technology stars to US rivals. The city's bourse introduced new rules to allow dual-class shares after initially resisting such a change, a move that had prompted Alibaba's decision to debut in New York in 2014.

More secondary listings from technology companies would bolster the Hong Kong exchange, which posted its worst profit drop in almost three years in the September quarter.

The financial hub has also been shaken by months of anti-government protests, casting uncertainty over its 2020 prospects.

Total fund-raising from Hong Kong initial public offerings will drop by as much as 27 per cent in 2020 to HK$230 billion (S$39.8 billion), PwC estimated on Thursday. About 180 companies may debut, with more "new-economy enterprises" to seek listings, thanks to rule reforms.

Benson Wong, a partner at PwC, said at a press briefing in Hong Kong: "More US-listed Chinese concept stocks will come back to Hong Kong in 2020."

He expects the trend to persist beyond next year, though offerings on Alibaba's scale aren't likely.

A secondary offering in Hong Kong would enable Chinese tech companies hedge their risks as US tensions simmer. The Donald Trump administration is stepping up scrutiny against Chinese technology players beyond Huawei Technologies Co; lawmakers have called for curbs on US pension-fund investments in the country's companies.

Going for a secondary offering in Hong Kong could also help these tech firms raise capital to tide them over an economic slowdown and increasing competition in 2020.

Ctrip, in particular, has about US$700 million in convertible bonds due in July. Its shares are trading at about US$33.50, 38 per cent below the agreed convertible price of US$54, said Bloomberg.

New tech debutantes like Alibaba will get a boost if they're added to the benchmark Hang Seng Index (HSI) and a stock connect programme that lets mainland investors buy shares in Hong Kong.

Hang Seng Indexes Co plans a consultation in the first quarter to discuss a raft of issues, including whether firms with weighted voting rights, like Alibaba, should be eligible for the HSI.

Members of the stock connect programme require reviews by the China Securities Regulatory Commission, the stock market watchdog. BLOOMBERG