Recently, Midea Group was listed on the Hong Kong Stock Exchange, becoming another "A+H" share listed company.

Data released by the London Stock Exchange Group's Deals Intelligence shows that in the first nine months of this year, the IPO activities (including IPOs and secondary listings) on the Hong Kong Stock Exchange (Main Board and GEM Board) raised a total of $7.2 billion, a year-on-year increase of 116.6%, and the number of IPOs also increased by 4.7%.

Currently, more and more companies are choosing to go public with "A+H" listings. "On the one hand, companies can expand financing channels and reduce financing risks by listing on both A-shares and H-shares simultaneously. On the other hand, the market environment and investor structure of A-shares and H-shares are different, and companies can better meet the needs of different investors and enhance the company's visibility and influence by listing on both markets. In addition, with the continuous strengthening of the interconnection between the two markets, companies choosing 'A+H' listings can also better utilize the resources of both markets to achieve rapid development," said Guo Tao, an angel investor and senior artificial intelligence expert, in an interview with a reporter.

Policy and market "dual drive"

"With the Federal Reserve's interest rate cut, global liquidity has increased, and the valuation of the Hong Kong stock market is at a low level, enhancing its attractiveness, leading to an increase in investment by investors; the Hong Kong Stock Exchange is continuously optimizing rules and actively promoting the listing of innovative and technology companies to meet the market's demand for emerging industries, these factors have jointly driven the increase in the Hong Kong Stock Exchange's IPO fundraising," said Zheng Lei, Chief Economist of Samoyed Cloud Technology Group, in an interview with a reporter.

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The aforementioned data released by the London Stock Exchange Group's Deals Intelligence shows that as of September 27, 2024, the Hong Kong stock capital market raised a total of $17.8 billion, a 29.5% increase compared to the same period in 2023. The number of stock capital market issuances also increased by 8.8% compared to the same period last year.

Specifically, in the first nine months, the IPO activities (including IPOs and secondary listings) on the Hong Kong Stock Exchange (Main Board and GEM Board) raised a total of $7.2 billion, a year-on-year increase of 116.6%, and the number of IPOs also increased by 4.7%. Among them, Midea Group's $4.6 billion secondary listing in Hong Kong in September became the largest stock capital transaction in Hong Kong this year, and also the largest new listing project since Kuaishou Technology's $6.2 billion Hong Kong IPO in 2021. Sichuan Bai Cha Bai Dao's $330.2 million IPO is the largest IPO in Hong Kong so far this year.

Guo Tao believes that the main reason for the increase in the Hong Kong Stock Exchange's IPO fundraising is the dual role of market environment and policy promotion. First, the global economy is gradually recovering, investor confidence is strengthening, and the enthusiasm for investment in the capital market is high, which provides a good financial support for the Hong Kong Stock Exchange's IPO market. Second, the Hong Kong Stock Exchange is continuously optimizing the listing system, attracting more high-quality companies to list in Hong Kong, and enhancing the market's attractiveness and competitiveness. In terms of funding, it can be seen that both domestic and foreign funds are actively pouring into the Hong Kong market, especially domestic funds have increased their investment in Hong Kong stocks through channels such as the Shanghai-Shenzhen-Hong Kong Stock Connect, which provides strong support for the growth of the Hong Kong Stock Exchange's IPO fundraising.

It is worth mentioning that regulatory measures have also been introduced to support companies to list in Hong Kong. In April, the China Securities Regulatory Commission (CSRC) issued five capital market cooperation measures with Hong Kong, relaxing the scope of eligible product ranges under the Shanghai-Shenzhen-Hong Kong Stock Connect for stock ETFs, including REITs in the Shanghai-Shenzhen-Hong Kong Stock Connect, supporting the inclusion of RMB stock trading counters in the Hong Kong Stock Connect, optimizing fund mutual recognition arrangements, and supporting leading domestic industry companies to list in Hong Kong.

Zhang Youyou, a senior partner at Jin Tiancheng Law Firm's Shanghai headquarters, analyzed that companies can raise funds in both the A-share and Hong Kong markets through "A+H" listings, meet the needs of different investors, and improve financing efficiency; at the same time, they can also enhance the company's international influence, attract more attention from international investors by listing in an international financial center like Hong Kong.Zhang Youyou further stated, "The 'A+H' structure itself has requirements for the scale and diversity of a company's business. For large enterprises, 'A+H' is a very good strategy, essentially providing an additional financing channel.

Hong Kong Stock Exchange Becomes the World's Fourth Largest IPO Exchange

Despite the resurgence of IPO enthusiasm at the Hong Kong Stock Exchange (HKEX), there is still pressure on the fundraising side. "At present, many companies going public on the Hong Kong stock market face certain difficulties in raising funds," Zhang Youyou told the reporter.

In response to this issue, HKEX Group's Chief Executive Officer, Chen Yiting, also discussed at the "Future Technology Summit 2024" that in the past few years under high-interest-rate conditions, global and Hong Kong capital markets have faced many challenges, leading to a sluggish Hong Kong new stock market and a significant reduction in fundraising amounts. She also emphasized that HKEX is not without good projects; it's just that companies are unwilling to go public at a discount.

Looking forward to the future trend of HKEX IPOs, a report released by Deloitte pointed out that by the end of the third quarter of 2024, after the completion of Midea Group's listing, HKEX has become the world's fourth-largest exchange in terms of IPO financing. If there is another interest rate cut within the year, and China's economic data performs strongly under the central bank's stimulus measures, the Hong Kong market will attract more large and ultra-large new stocks to go public, solidifying its ranking in the top four of the global new stock market.

For companies, Zheng Lei said that when choosing to go public in Hong Kong, companies need to ensure the transparency and accuracy of financial reports and comply with relevant laws and regulations of the Hong Kong securities market; assess whether they meet the listing standards of the Hong Kong securities market and formulate an appropriate listing plan. In addition, companies also need to consider how to handle the relationship between interests and investors, as well as how to protect the company's trade secrets and intellectual property rights. Currently, Hong Kong stock investors have a high level of attention and recognition for new economy and technology companies, while traditional industries receive less attention, especially small and medium-sized listed companies, which may not be the best choice for 'A+H' due to low valuations and poor liquidity.

In addition to facilitating corporate financing, Hong Kong also has significant advantages in asset allocation. Wang Yunlu, Head of Fund Services Business Development for Greater China at Vistra, pointed out that for Chinese fund managers, Hong Kong is not only a gateway to attract international capital but also a key hub for expanding the investor base, exploring global investment opportunities, and establishing strategic partnerships. The new Capital Investment Entrant Scheme (CIES) introduced by the Hong Kong government, along with innovative fund structures such as Limited Partnership Funds (LPF) and Open-Ended Fund Companies (OFC), has further enhanced its attractiveness as a fund registration location. These policies not only improve the operational efficiency and tax advantages of funds but also strengthen regulatory compliance, providing fund managers with greater flexibility and cost-effectiveness.

"By the end of 2023, the scale of assets and wealth management in Hong Kong has approached four trillion US dollars, consolidating its leadership position in the Asian private equity field. Fund managers and family offices can explore broader opportunities in Hong Kong. Hong Kong can provide flexible and robust support in fund structure design, administrative service provision, and the management of portfolio companies and limited partner relationships," said Wang Yunlu.