SINGAPORE – Fears that Chinese companies will be listed on US stock markets will eventually benefit China, according to consulting firm Bain & Company.
This is because these companies want to list in Hong Kong in order to access international investors and attract funds to the market, suggested John Fildes, an expert partner at Bain & Company.
The New York Stock Exchange (NYSE) must withdraw three Chinese telecommunications giants, after making two changes to that decision. On Thursday, he finally said he would eliminate U.S.-traded shares of China Telecom, China Mobile and China Unicom, citing an executive order signed by President Donald Trump banning U.S. investments in Chinese companies with alleged links to the Chinese military. .
But all this is for the benefit of China, as these companies will make a secondary list in Hong Kong.
John Fildes
Bain & Company
“If that happens, it will certainly benefit Hong Kong quotes from these companies,” Fildes said, adding that there would be an “initial price drop” due to nervousness about whether U.S. investors will return to the actions.
Shares in Hong Kong of the three Chinese telecom companies fell between 7% and 11% on Thursday after the NYSE announcement.
Monday, January 4, 2021, American flags on the New York Stock Exchange (NYSE) in New York (USA).
Michael Nagle | Bloomberg | Getty Images
Fildes also told CNBC’s “Street Signs Asia” that U.S. law requiring foreign companies to comply with U.S. audit standards has prompted many Chinese companies to look at listings elsewhere.
“But all this is for the benefit of China, because these companies will make a secondary list in Hong Kong,” he said. “If they are canceled in the US, international investors will be able to access these companies through their quotes in Hong Kong.”
“Extremely attractive” Asian markets
It may not be just “roadblocks” in the United States that are pushing companies to trade in Asia, Fildes said. The Chinese and Hong Kong markets have become more attractive, although there is “a lot of capital” to raise in the United States.
“We are seeing the growth of the Star Market in Shanghai, as well as the smoothing of some rules around ChiNext in Shenzhen that make national lists more attractive,” he said.
Star Market and ChiNext are jointly focused on Nasdaq-style technology that have loosened regulations as part of reforms in China’s financial markets.
Asian markets are extremely attractive and there is a lot of cash.
John Fildes
Bain & Company
Hong Kong is also “much more attractive” now, he said, noting that the exchange allows companies to list shares with weighted voting rights. This means that certain actions confer more voting power than others. Courses in Asia introduced the system, which is practiced in the US, to compete for initial public offerings.
“Hong Kong is definitely back with these new rules,” he added. “Shanghai and Shenzhen are also becoming more open and attractive to technology stocks.”
“Asian markets are extremely attractive and there is a lot of money around,” he said.
Investors targeted the stock markets in a low-rate environment and initial public offering activity in 2020 was “phenomenal” globally, Fildes said.
That momentum is likely to continue this year. “We don’t see, at the moment, any real reason why this will not continue until 2021,” he said.