The latest news that is flying around the investment world is that the 50-year old Hang Seng Index is going to allow secondary listings in August of this year in a bid to lure the big tech companies away from NASDAQ. In September of 2019, Hong Kong Exchange and Clearing Limited (HKEX) made a surprise bid to take over the London Stock Exchange Group, which shows HKEX has an ambition to become the world’s largest market place.
Dual Class Share Structures
By allowing the use of dual class share structures, HKEX plans to include more companies for listings, and this is due to happen in August of this year. Of course, companies will be bound by the rules of primary listings, and the HKEX’s secondary listing guidelines will give companies more width, as greater flexibility is promised.
Perfect Timing
Some financial analysts are saying that this relaxation of restrictions for secondary listings is largely due to the heightened economic tensions between China and the US, as the past 6 months have seen rising disagreements between the two economic giants. The Covid-19 pandemic certainly hasn’t helped heal the rift, with many believing that the virus originated from a Wuhan lab accident, and as far as the Far East market experts are concerned, HKEX are trying to woo the big tech players away from NADSAQ. One thing is for sure, the secondary listings in Hong Kong will generate a lot of interest, with large corporations looking to increase their primary listings in preparation for the new rules.
Increase in Hong Kong Secondary Listings
There has been a notable increase in secondary listings in Hong Kong, a sign of encouragement from the eased policies, which follows the successful secondary listing of Alibaba, with NetEase, who happen to be China’s biggest tech company, also offering secondary listings in a bid to raise U$ 2.7billion. Baidu (China’s biggest search engine) and the catering giant Yum China are forecast to pursue HK secondary listings in the very near future.
The Alibaba Incident
Prior to 2018, dual class shares were not allowed in Hong Kong, with the exception of certain unique circumstances, something that Alibaba tried hard to lobby for, but Hong Kong remained resolute regarding the ‘one share-one vote’ policy. At that time, 28 Alibaba partners controlled most of the Board of Directors, despite only having 10% of the shares, and this resulted in Alibaba shifting to list in New York, where there were less restrictions, while other tech companies followed suit, placing their primary listings in NASDAQ. At this current time of economic uncertainty, HKEX has realised that it must amend its rules to encourage the huge eastern tech players to move from New York, hence the relaxation of secondary listing guidelines.
Revamped Hang Seng Index
The Hang Seng Index is to be radically changed in a bid to woo the huge tech companies away from NASDAQ and other Western markets and by allowing secondary listings, it is believed that many companies like Xiaomi and Alibaba will list their stock when the secondary listing rules are amended.
Specialist Assistance
If you are looking to invest in the Hang Seng Index, there are advisory companies that can help you to:
- Assess Readiness of IPO
- Make the right decisions regarding capital and invitation structure in order to maximise share value.
- Ensure Post-Listing Compliance
It is important to forge an alliance with a local company offering corporate secretarial services, who would advise on many aspects, while also ensuring that your company is compliant. The earliest time to include new stocks is in August 2020, so now is a good time to start the process, and with the right corporate services, you will be ready when new stocks are accepted.
Choosing to secondary list in Hong Kong is a great way to enter new markets, while at the same time following the primary listing guidelines, and the changes will make it easier for those with primary listings to add secondary listings.
The global stocks and shares markets are all on edge at the current time, as global instability takes hold, and it is vital for the big tech companies in particular to stay abreast of policy changes, as these may well offer big benefits. The global pandemic will no doubt have a negative impact on many industries, and it is difficult to forecast outcomes, as there are so many variables to take into account.
President Trump has made no secret of the fact he is looking to remove Chinese influence in NASDAQ, as the US Senate approved the Holding Foreign Companies Accountable Act, meaning that US companies must certify they are not controlled for foreign governments.
Chinese – US relations are some cause for concern and stock markets around the world are bracing themselves for fallout from this economic war between the two biggest players.
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