HKEX global offices to bring good return

  • Openings in the US and Europe by city’s stock exchange aim to attract more initial public offerings and Chinese companies that face delisting on Wall Street

Mainland China has long been a gravy train for Hong Kong’s capital market. But as an international financial hub, it cannot afford to put all its eggs in the same basket.

As the city’s premier financial representative, Hong Kong Exchanges and Clearing (HKEX) needs to expand its global reach and to market the city as a fundraising destination.

In its outreach, HKEX plans to open at least two offices, one in the United States and another in Europe. It will be interesting to see whether it will ultimately decide to station a representative in Britain or in the European Union, that is, as a prognostic on London’s future as a place for start-ups and businesses.

Chinese companies now account for 80 per cent of the equities market capitalisation in the city. HKEX realises it needs to diversify sources for business.

And, as geopolitical factors become increasingly difficult for businesses to navigate, it’s even more important for the world’s fourth biggest stock exchange to provide timely information and enhanced communications to enable foreign businesses to explore opportunities in Hong Kong and the mainland.

The city has been the world’s No 1 destination for initial public offerings in eight of the past 13 years. But in the past two years, it fell behind New York and Shanghai because of the drying up of Chinese tech IPOs.

Currently, only four European-domiciled companies and five US-domiciled firms are locally listed.

The combined market cap for the Europeans amounts to a paltry HK$204.8 billion (US$26 billion); that for the American firms is even smaller, at a combined HK$53.8 billion, the equivalent of 0.1 per cent of Hong Kong’s entire market cap.

And there is, of course, the so-called homecoming angle. Up to 273 US-listed Chinese companies may face delisting under US laws if the two countries cannot resolve their dispute over auditing standards and access.

Just 80 of these largest US-listed companies account for 90 per cent of the total market cap of all 273 firms.

Attracting more of these big whales to list in Hong Kong will be a bonanza. Having an office on Wall Street to help such companies repatriate makes good sense.

Source: SCMP Editorial

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