And now, Chinese dominate global fund raising
Firms in China brought in half of equity capital raised globally this year so far, setting a record that highlights the economy’s earlier revival from the Covid-19 pandemic, plus the degree to which soured US relations are turning Chinese firms homeward.
China-based companies sold shares worth $32.1 billion in January-June including multi-billion-dollar secondary listings in Hong Kong, equivalent to 49.8% of worldwide offerings, showed data from Refinitiv. The total for U.S. firms was $15.8 billion.
This is Not The End
“With massive liquidity injections by various governments (supporting virus-hit economies), I’m not surprised by the size of Chinese capital raised this year - and the trend may continue,” Li He, capital markets partner at Davis Polk, said of China firms taking advantage of their early lockdown emergence.
What's Behind the Popularity
Chinese fundraising has been helped by the popularity of Shanghai’s year-old growth-focused STAR Market, as well as well-received initial public offerings (IPOs) in Hong Kong and the massive secondary listings - including the $3.9 billion raised by e-tailer JD.com Inc this month and $3.1 billion by games developer NetEase Inc.
Escalating Sino-US geopolitical tension over issues such as trade is widely expected to prompt more US-listed Chinese firms to conduct secondary listings closer to home where they can raise funds in markets absent of anti-Chinese sentiment. Companies considering a secondary Hong Kong listing include Yum China Holdings Inc and ZTO Express (Cayman), said two people with direct knowledge of the matter. Secondary deals are also increasing investor interest in Hong Kong, a market with a reputation for hosting stodgy financial and property groups rather than growth-focused tech companies.
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Also of concern for Chinese firms are US steps aimed at improving the transparency of financial disclosure but which clash with the Chinese government’s reluctance to give foreign entities access to onshore records. In May, just weeks after former market darling Luckin Coffee Inc (LK.O) said its sales had been falsified, the US Senate passed a bill that could force Chinese firms to delist if they do not allow the Public Company Accounting Oversight Board to access their audited accounts for three consecutive years.
It's All About Prestige
For some Chinese companies, prestige continues to propel them toward US listing in spite of political wrangling and negative sentiment toward Chinese firms following fallout from Luckin Coffee. Chinese groups still managed to raise $1.7 billion through New York IPOs during 2020’s coronavirus-hit first half, versus $3.42 billion in January-June last year.