A+H Listings Surge in Hong Kong

The excitement surrounding the dual listing of A-share companies on Hong Kong's stock market has been escalating significantlyWith giants such as Midea Group and SF Holding making the leap to Hong Kong, a trend is unfolding that signals a broader move among A-share industry leadersWhat was once a sporadic occurrence is now morphing into a concerted effort as many companies seek to capitalize on the strategic advantages of being listed in two major financial hubs.

One of the most notable recent developments includes the announcement that the battery manufacturing colossus, CATL (Contemporary Amperex Technology Co., Limited), is contemplating a secondary listing in Hong Kong, aiming to raise a staggering $5 billionThis could potentially dwarf Midea Group's earlier successful listing which amassed $4.6 billion in September of this year, marking CATL's endeavor as it seeks to engage in what could become the largest IPO in Hong Kong since Kuaishou's $6.2 billion fundraising effort in early 2021.

The uptick in A-share companies seeking listings in Hong Kong has been evident this year, with 20 firms either planning or splitting subsidiaries for a HK listing

This surge in A+H listings—a term denoting simultaneous listings on both the mainland and Hong Kong markets—illustrates the growing allure of Hong Kong as a venue for raising international capital.

In particular, SF Holding made headlines on November 27 as it became the first express delivery firm in China to secure an “A+H” listing on the HKEX (Hong Kong Stock Exchange), raising an impressive HK$5.83 billion (equivalent to approximately USD 750 million). Following closely, Longpan Technology listed on October 30, securing HK$495 millionMidea Group's pioneering status was solidified through their significant HK$30 billion fundraising in mid-September, the largest IPO in the Hong Kong market over the past three years, and culminating in a market valuation nearing HK$570 billion by December 19.

To put things in perspective, only one A-share company undertook a Hong Kong listing last year which starkly contrasts with this year’s developments

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Moreover, data indicates that as of October 31, there are 151 companies successfully listed on both domestic and Hong Kong markets, primarily in sectors ranging from financial services to healthcareThe numbers of A-share firms crossing over to the Hong Kong market have been sparse in the past few years; only limited successful listings were seen in 2020 (5), 2021 (2), 2022 (4), 2023 (1), with a predicted increase to 3 in 2024, which reinforces the current surge in dual listing enthusiasm among Chinese firms.

A closer examination reveals that top-tier industry players such as Haitian Flavoring & Food, Hansoh Pharmaceutical, and well-established firms within a variety of sectors, including logistics and AI technology, are now planning to enhance their visibility and capital through Hong Kong listingsNotably, several firms with remarkable market capitalizations exceeding 100 billion yuan, such as Midea and SF, are leading the way in this trend towards international exposure.

The reasons behind this surge are multifaceted

According to seasoned investment banker Wang Jiyue, two primary factors underlie the increasing trend of “A+H” listingsFirstly, the resurgence of the Hong Kong market has become a siren call for A-share corporations looking to raise fundsThe revitalization of Hong Kong stock exchanges has translated into heightened market activity, presenting a platform for Chinese enterprises to draw on international investmentsSecondly, these firms are increasingly recognizing the imperative for internationalization, utilizing Hong Kong as a springboard to access broader investment horizons and to harness favorable capital sources.

Many analysts argue that A-share companies opting for Hong Kong listings not only enhance their international standing and competitiveness but also broaden their financing channels, vital for driving research and development and advancing global strategies

Wang Wei, Chairman of SF Holding, highlighted during their listing that leveraging the Hong Kong platform could be crucial for expanding international market reachTheir prospectus outlined that nearly 45% of the capital raised would be directed toward bolstering their international and cross-border logistics capabilities.

Similarly, Midea Group emphasized that their move to Hong Kong aligns with their ambition to elevate global brand recognition and pursue a rigorous international branding strategyFurthermore, global pharmaceutical leader, Hansoh Pharmaceutical, highlighted their intentions to pursue a Hong Kong listing primarily to facilitate enhanced technological innovation and deepen their dual-driven international development strategy.

Haitian Flavoring & Food also articulated their motives, stating that a Hong Kong listing is pivotal for accelerating their international strategy and increasing overseas financing capabilities

The recovery of the Hong Kong market has played a considerable role in this selection process, manifesting as a hotbed for new stock listings in the wake of the brisk performance of new IPOs after a challenging economic climate.

Taking a look ahead, analysts are optimistic about the prospects for 2024, forecasting that an influx of international listings could be on the horizon as the Hong Kong market gains momentum alongside anticipated interest rate cuts from the Federal Reserve and fresh economic stimulus measures from mainland ChinaThe momentum seen in this space has not merely been a passing trend but rather a clear indication of the structural adjustments that firms are willing to undertake in response to global market demandsThe well-deserved attention on “A+H” shows a promising pathway forward, as companies navigate the dynamic landscape of global finance and strive for expansive growth in their operations.