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Tech tycoons flood Hong Kong with US$20b of stock listings

[BEIJING] China's tycoons are flooding Hong Kong's exchange with a US$20 billion worth of new listings.

While the city's rich are preparing for a worst-case scenario amid a controversial national-security law, major mainland billionaires are coming in. The latest to do so: William Ding of NetEase and JD.com's Richard Liu, whose companies completed secondary listings there last month. They follow Jack Ma, whose Alibaba Group Holding stock issuance in November was the city's largest since 2010.

Together, the three moguls' firms have raised US$20 billion from share sales in the former British colony, and that may be just the start of a new wave of listings by mainlanders.

"Chinese billionaires' tech companies are helping the capital market in Hong Kong for a pivotal change and secure its Asia financial hub status," said Edward Au, managing director of the southern region at Deloitte China. "The city's stock exchange is also trying to make it a more appealing destination for new-economy companies."

The national-security law that was approved on Tuesday is threatening to erode Hong Kong's judicial independence from the mainland, a key part of the city's appeal to international companies and investors. The US has already started to make it harder to export sensitive American technology to Hong Kong.

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While Chinese billionaires have myriad reasons for pursuing listings there - including a less welcoming political environment in the US - their choice of the city over alternatives on the mainland may help ease concerns that the former British colony risks losing its status as a financial center.

Chinese tech tycoons with companies trading in the city now have a combined net worth of US$182 billion, more than the 10 richest people in Hong Kong, according to the Bloomberg Billionaires Index. For them, Hong Kong is becoming increasingly appealing as Chinese companies listed in the US face growing scrutiny and potential delistings following an accounting scandal at Luckin Coffee and mounting tensions between the world's two largest economies.

JD.com and NetEase have raised a combined US$7 billion with their secondary listings last month - almost two-thirds of the total for Hong Kong in the first half of the year, according to data compiled by Bloomberg. Deloitte expects that as many as six Chinese companies currently traded in the US will choose the city for a second listing by year-end. Robin Li's Baidu is among those weighing that option.

The city eased listing rules in 2018 to attract companies such as smartphone maker Xiaomi and Meituan Dianping, China's largest on-demand food delivery service. The move could eventually reshape the composition of the benchmark Hang Seng Index, according to Deloitte's Au. In May, the index manager announced new criteria to allow companies such as Alibaba to be included in the gauge.

"The influx of these companies will greatly increase the representation of new-economy companies in Hong Kong, adding vibrancy and diversity to the market," said Louis Lau, partner at KPMG China's capital markets advisory group. "The continued listing of mega-sized Chinese firms also reinforces Hong Kong's position as Asia's financial hub."

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