SINGAPORE – Consulting firm Bain & Company said concerns that Chinese companies starting on US exchanges will ultimately benefit China.
This is because those companies will look to listings in Hong Kong in order to reach international investors and attract money to the market, suggested John Fields, an expert partner at Bain & Company.
The New York Stock Exchange (NYSE) is set to write off three Chinese telecom giants, After making two turns on this decision. On Thursday, it finally said it would remove shares traded in the US in China Telecom, China Mobile and China Unicom, citing Executive order signed by President Donald Trump Banning US investments in Chinese companies with alleged ties to the Chinese military.
But this is all in China’s favor because these companies will, you know, make a secondary listing in Hong Kong.
John Fields
Benn & Co.
“If that happens, it would definitely benefit the listing of these companies in Hong Kong,” Fields said, adding that there would be an “initial drop in prices” due to tension over whether US investors would return to stocks.
Hong Kong-listed shares of the three Chinese telecom companies Decreased between 7% and 11% On Thursday after the announcement of the New York Stock Exchange.
American flags outside the New York Stock Exchange (NYSE) in New York, USA, on Monday January 4, 2021.
Michael Nagel | Bloomberg | Getty Images
Fields also told CNBC ‘Street Signs Asia’ That the law of the United States Foreign companies are required to comply with US auditing standards It prompted a lot of Chinese companies to look at listings elsewhere.
“But this is all in favor of China because, as you know, these companies will do a secondary listing in Hong Kong,” he said. “If they were removed from the list in the US, international investors would be able to access these companies through their listings in Hong Kong.”
‘Very attractive’ Asian markets
Fields said it may not be just “bumps in the road” in the US that are pushing companies to list in Asia. The markets of China and Hong Kong are becoming more attractive, although there is “a lot of capital” to be raised in the United States
“We are seeing growth in the Star Market in Shanghai as well as relaxing some of the rules around ChiNext in Shenzhen that are making local listings more attractive,” he said.
Star Market and ChiNext are technology-focused boards of directors similar to the Nasdaq that have relaxed regulations as part of reforms in Chinese financial markets.
Asian markets are very attractive and there is a lot of money around.
John Fields
Benn & Co.
He said Hong Kong is now “more attractive”, noting that the exchange allows companies to list shares with weighted voting rights. This means that some stocks give more voting power than others. Stock exchanges in Asia have introduced the system, practiced in the United States, to compete for initial public offerings.
“Hong Kong has definitely returned there with these new rules,” he added. “Shanghai and Shenzhen are making themselves more open and attractive to tech stocks, too.”
“Asian markets are very attractive and there is a lot of liquidity around,” he said.
Fields said that investors have turned to equity markets in a low-price environment and initial public offering activity in 2020 was “exceptional” globally.
This momentum is likely to continue this year. “We do not see at the present time a real reason not to continue this until 2021,” he said.
