US’ move against Weibo to further push Chinese firms away
The intensifying crackdown by the US government toward Chinese companies listed in the US, with Chinese social media giant Weibo Corp being the latest target of such policies, will further deter Chinese mainland companies from seeking IPOs in the US that used to be a paradise for global fundraising, Chinese experts said on Thursday.
Such developments will further speed up the process for US-listed Chinese companies to shift to the mainland or Hong Kong markets, according to the experts.
Hong Kong Exchanges and Clearing said in a statement to the Global Times on Thursday that it had recently amended its Listing Regime for Overseas Issuers, which will “further enhance the attractiveness and competitiveness of Hong Kong’s IPO market.”
The US Securities and Exchange Commission (SEC) on Wednesday, US time, added Weibo to its list of companies not in compliance with the so-called Holding Foreign Companies Accountable Act (HFCAA), the sixth Chinese company to be put on the list.
On March 8, the SEC identified five Chinese companies, including restaurant operator Yum China Holdings and semiconductor process equipment manufacturer ACM Research, as companies that were noncompliant with the HFCAA.
The share price of Weibo eased 0.59 percent on Wednesday in the US. Shares of many Chinese companies listed in the US, including well-known firms like Alibaba and Pinduoduo, collectively gained in spite of the SEC’s movement.
Xi Junyang, a professor of finance at the Shanghai University of Finance and Economics, said that the US won’t change its general tone of suppressing Chinese companies listed there, because the investment cycle in the US shows a generally negative attitude toward them for doubting the listing standards of those firms.
Besides, the US’ general policy tone toward China is unfriendly, which means that it won’t provide a very comfortable environment for such Chinese firms, Xi noted.
As the US continues to tighten regulations for Chinese companies, it’s increasingly clear that Chinese companies will refrain from seeking IPOs in the US, while companies already listed there will gradually shift to the mainland and Hong Kong markets, experts said.
According to a report by PricewaterhouseCoopers (PwC), 42 Chinese mainland technology, media, and telecom (TMT) companies sought IPOs in Hong Kong or overseas in 2021, compared with 50 in 2020.
Experts said that the Hong Kong stock market will be the top beneficiary of the changing climate on global financial markets, as its listing criteria and conditions are closer to international standards.
The PwC data also showed that although only three TMT companies sought secondary listings in Hong Kong in the second half of last year, their total fundraising stood at 27 billion yuan ($4.24 billion), accounting for more than 70 percent of the total fundraising volume of domestic TMT firms that went public overseas during the period.
Xi predicted the number of mainland companies that seek IPOs or secondary listings in HK will gradually climb in the next few years.
“Many companies will wait and see because the relative valuations of Hong Kong stocks are low nowadays. As market valuations turn better, the trend of seeking IPOs in HK will become very evident,” Xi said.
The HKEX said in its statement that as of March 21, it had welcomed six mainland companies to list this year, out of 10 IPOs in total.
Authors: Xie Jun, Li Xuanmin, Global Times