(CapitalWatch, Jan. 11, Hong Kong) Officials at the 15th Asian Financial Forum say that regulatory reform in Hong Kong will better attract U.S.-listed Chinese companies to debut on the Stock Exchange of Hong Kong.
Carrie Lam, chief executive of the Hong Kong Special Administrative Region, acknowledged that global crises including the Covid-19 pandemic and climate change have brought issues to the forefront, but she and other officials are optimistic about the opportunities this could present to green energy companies. Lam said that the Hong Kong Special Administrative Region government expects around $30 billion in public-sector investment over the next 15 to 20 years to support carbon reduction measures.
Financial Secretary of Hong Kong Paul Chan said that the city's capital market appeal for companies is growing due to new developments in green financing and digital currency. The Stock Exchange of Hong Kong has opened the door to more firms by slashing the listing valuation threshold for companies that have been trading in the U.S. to launch a secondary listing from around $384 million to $5.1 million. Hong Kong has also opened up new opportunities for startup companies by allowing special purpose acquisition companies to list.
Chan also brought up the likelihood of mainland companies to seek Hong Kong listings in the wake of the regulatory uncertainty currently posed by U.S. listings. Beijing has recently taken steps that made listing overseas tougher. After an extended probe into the ride-hailing giant Didi Global (NYSE: DIDI), Chinese authorities requested it delist from Wall Street just months after the company netted the largest Chinese U.S. IPO since that of Alibaba Group Holdings (NYSE: BABA; HKEX: 9988) in 2014. Didi complied with the request and is now reportedly seeking a "listing by introduction" in Hong Kong.
Companies are also facing pressure from the U.S. government as the Securities and Exchange Commission announced finalized rules to implement the Holding Foreign Companies Accountable Act which would force foreign public companies to delist in the country if auditors don't comply with requests for information from U.S. regulators. The law was passed in 2020 in response to Chinese regulators repeatedly denying requests from the Public Company Accounting Oversight Board. Under the new law, companies can be kicked out of the New York Stock Exchange and Nasdaq if they are found in noncompliance with the rules for three years until 2023.
Over the past year, Chinese companies have increasingly chosen Hong Kong as the listing destination of choice. Vice chairman of the China Securities Regulatory Commission, Fang Xinghai, said that the number of listed mainland companies in the city reached 1,222 by the end of 2021, making up 47% of all companies listed in Hong Kong.