Hong Kong’s China listings: Another China own-goal
Chinese regulators now want the largest state-owned firms to list at home, leaving smaller private companies to trade in Hong Kong. But these might be the best Chinese companies and losing them may be a big mistake.
Could Hong Kong’s China listings party be about to end? There are rumours in the SAR that the China Securities Regulatory Commission, the mainland’s chief securities regulator, is deliberately dragging its heels on the approval of new listings for H shares, the designation given to mainland state-owned enterprises listed in Hong Kong, and urging companies instead to list domestically in Shanghai or Shenzhen.
Bankers familiar with mainland listing hopefuls in Hong Kong say that timetables have been derailed and plans diverted onshore as a result of CSRC intervention. And the listing process has been speeded up in China to encourage mainland companies to stay at home.
There is sound reasoning behind such moves. Although China’s mass privatization programme has gained much from outsourcing its listing venue to Hong Kong, the gains are mainly for the short term and monetary in nature. In the longer term, the country can ill afford to allow its best and largest companies to venture onto what remains effectively an offshore market. Denying its own nationals access to its best companies is no way to develop the sustainable domestic equity market that China desperately needs to fund continued expansion.
Although the reasoning might be sound, like much in the development of China’s domestic stock markets the execution leaves a lot to be desired.