Author｜Eastland, Tiger Sniff Research Director
Head picture｜IC photo
The IPO of Xiaomi and Meituan, the return of Ali, JD.com, and NetEase, the dream of "Oriental Nasdaq" on the Hong Kong Stock Exchange has revived.
The clock was set back to September 2019. The "Hong Kong Stock Exchange" issued an invitation to the London Stock Exchange (LSE) but was rejected. Their favorite partner is the Shanghai Stock Exchange or the Shenzhen Stock Exchange, and the Hong Kong Stock Exchange is not even a spare tire.
This time, the scheming British may be short-sighted.
World-class stock exchange
1) Number of listed companies and total market value
As of the end of May 2020, the Hong Kong Stock Exchange There are 2482 listed companies, 2105 and 377 on the Main Board and ChiNext respectively.
Xiaomi, Meituan, and Ali joined one after another, and the Hong Kong Stock Exchange came to an end. At the end of 2019, the total market value of listed companies reached a record 38.2 trillion Hong Kong dollars (unless otherwise specified, the currency units in this article are all in Hong Kong dollars) . At the end of May 2020, it will fall back to 34 trillion.
Of the total market value of listed companies on the Hong Kong Stock Exchange, over 99 % Comes from a company listed on the main board. As of the end of May 2020, the total market value of 2,105 Main Board listed companies is 33.9 trillion, an average of 16.1 billion each, which is 2.7 billion less than the end of 2017 before Ali, Meituan and Xiaomi were listed on the Hong Kong Stock Exchange. It seems that other main board listed companies are "not doing very well."
2) Transaction amount
In 2016, the turnover of the Hong Kong Stock Exchange fell to the bottom. The annual turnover was 16.4 trillion, and the average daily turnover was only 66 billion. At the end of 2017, the Hong Kong Stock Exchange finally allowed companies with the same shares with different rights to be listed. In 2018, new economic companies such as Xiaomi and Meituan were listed on the Hong Kong main board, which greatly increased their popularity.
In 2018, the turnover of the Hong Kong Stock Exchange reached 26.4 trillion, and the main board's daily turnover reached a record high of 107 billion. In the first five months of 2020, the total turnover of the Hong Kong Stock Exchange reached 11.7 trillion, and the average daily turnover reached a record high of 116 billion Hong Kong dollars.
3) IPO overview
The primary role of the capital market is financing, especially initial public offerings (IPOs).
In the bleak 2012, there were only 64 company IPOs on the Hong Kong Stock Exchange, 52 on the Main Board and 12 on the ChiNext.
In 2017, the total number of IPOs rebounded to 174, but GEM companies with small financing scales accounted for 80 seats. This year, refinancing accounted for 78% of the total funds raised on the Hong Kong Stock Exchange, while IPO funds only accounted for 22%.
In 2018, when the “same share with different rights” was opened, the number of IPOs on the Hong Kong Stock Exchange reached 218, with 143 on the Main Board and 75 on the ChiNext.
In 2019, the number of IPOs reached 183, with 168 on the Main Board and 15 on the Growth Enterprise Market respectively. Main Board IPOs accounted for more than 90%. The 15 GEM IPOs raised a total of 97 million Hong Kong dollars, accounting for 0.2% of the total funds raised by all companies on the Hong Kong Stock Exchange, which can be ignored.
In the first five months of 2020, a total of 55 IPOs were listed on the Main Board, 9 less than the same period in 2019.
In 2018, the number of IPOs reached 218, and the funds raised were 288 billion. Since 2011, the amount raised by the Hong Kong Stock Exchange IPO exceeded the refinancing for the first time.
288 billion The Hong Kong dollar (equivalent to 36.56 billion U.S. dollars) ranked first in the world’s major capital markets in total IPO financing. The New York Stock Exchange ranked second with 28.57 billion U.S. dollars, the Shanghai Stock Exchange ranked sixth with 13.47 billion U.S. dollars, and the London Stock Exchange ranked seventh with 10.56 billion U.S. dollars. Shenzhen Stock Exchange ranks ninth with 7.79 billion US dollars.
This cannot but be said to be the credit of Li Xiaojia's move away from the "same share with the same power" mountain. The three companies with the most IPO financing in 2018 A total of HK$134.6 billion was raised, equivalent to US$17.2 billion (accounting for 47% of the annual IPO proceeds), which is US$3.7 billion more than the total IPO proceeds of the Shanghai Stock Exchange. Among the three companies, Xiaomi and Meituan have adopted "AB shares." Structure.
In 2019, the funds raised by the Hong Kong Stock Exchange fell again. IPO raised and refinancing were 313.3 billion and 140 billion respectively.
The United States is the world's largest economy, with mature and developed capital markets, attracting outstanding companies from all over the world, and its scale is unparalleled in the world. China is the second largest economy in the world, and outstanding companies are scattered in the Shanghai Stock Exchange, Shenzhen Stock Exchange, Hong Kong Stock Exchange, New York Stock Exchange and Nasdaq. The Hong Kong Stock Exchange can rank among the world-class stock exchanges, and the scale of raised funds can even be obtained. The top pick (it has become the global IPO fund-raising champion 7 times in the last 11 years), reflecting the vitality of China’s economy.
Regional capital markets
As of the end of 2019, There are 1241 mainland companies listed on the Hong Kong Stock Exchange, of which 1144 are on the Main Board and 97 on the Growth Enterprise Market.
The proportion of the total market value of mainland companies in the total market value of listed companies on the Hong Kong Stock Exchange has been increasing. . As of the end of 2019, the total market value of 1,241 Mainland companies was 27.9 trillion, accounting for 73.24% of the total market value of the Hong Kong Stock Exchange.
As of the end of May 2020, the total market value and total transaction volume of mainland enterprises were respectively It accounts for 76.9% and 81.9% of the total market of the Hong Kong Stock Exchange.
Mainland companies are also the protagonists of IPOs, firmly occupying the top ten in annual IPO financing. Since 1986, nine of the top ten IPOs are from mainland China, and the number one is Hong Kong-based AIA. The second to fifth places are ICBC, Ali, Agricultural Bank and Bank of China.
One of the reasons for LSE’s rejection of the Hong Kong Stock Exchange is "the high degree of geographic concentration of business." The implication is that the Hong Kong Stock Exchange is a regional capital market, and marriage with it is "backward".
2) Serious differentiation of individual stocks
The overall data of the Hong Kong Stock Exchange is still plausible, and some indicators can even rank first in the global exchanges, but this is a high degree of differentiation. Market. The main board companies have eliminated dozens of dominant companies, and the rest are "junk"; the GEM is all rubbish.
In May 2020, the fifty main board companies with the largest market capitalization accounted for 64.41% of the total market capitalization of the main board listed companies, and the remaining 2,095 companies accounted for 35.59% of the total market capitalization.
The market value of the top ten companies such as Alibaba, Tencent, China Construction Bank, China Mobile, and Meituan accounted for 42.5% of the total market value of the main board, with an average of 1.44 trillion each. The 2005 main board listed companies other than the "Top 50" have an average market value of 6.1 billion.
In May 2020, the trading volume of the 20 most active companies accounted for 48.37% of the total trading volume of the main board, with an average turnover of 2.19 billion per company per trading day. The remaining 2,085 companies each traded 22.6 million each trading day.
3) GEM fiasco
On November 25, 1999, Hong Kong’s GEM started trading, and the first seven companies "starred", the limelight far exceeded that of the main board IPO at that time Upstart. In 2000, the listing of heavyweight companies such as TOM triggered a subscription frenzy. 47 newly listed companies raised a total of 14.8 billion funds, an average of nearly 300 million each.
Such a good beginning.Unfortunately, the first year of the Hong Kong Growth Enterprise Market has also become its peak. Since then, the number of newly listed companies on the Hong Kong Growth Enterprise Market and the amount of money raised have been low. The Hong Kong Growth Enterprise Market, which cannot attract outstanding startup companies, has lost its "source of living water" and has become more and more distant from the dream of "Oriental Nasdaq".
200In January and 2002, the number of IPOs on the ChiNext was 57; since then, it has been declining. From 2005 to 2010, there was only 1 IPO every 10 weeks; in 2007 and 2008, there were 2 IPOs per year... Since 2011 The number of IPOs rebounded and reached 34 in 2015, but the total amount of funds raised was only 2.8 billion, with an average of 82.35 million raised per company.
In 2018, 75 companies IPO, the average raised amount fell to 68 million, equivalent to 8.7 million U.S. dollars, lower than the A round of financing of many startups.
In 2019, there were only 15 IPOs on the Hong Kong Stock Exchange, raising 970 million yuan, an average of 64.67 million each.
I was wasted for nearly two decades, and Hong Kong’s Growth Enterprise Market did nothing. It did not have the slightest appeal to higher-quality technology companies.
You have to leave a window if you don’t tear down the wall
Compared with the Shanghai Stock Exchange and the Shenzhen Stock Exchange, the unique advantage of the Hong Kong Stock Exchange is "being outside the wall."
After joining the WTO in 2001, China has assumed the obligation to gradually open its financial market. By April 1, 2020, China’s financial market has been fully opened to foreign investors-foreign financial companies such as brokers and insurance companies. , Futures companies, and rating agencies can all come to China to open wholly-owned subsidiaries, but banks are not included.
It should be noted that my country’s opening up is the financial market, not the capital market.
In a sense, reform and opening up means opening up to foreign capital-welcome to invest in and build factories in mainland China (FDI); successively allow Chinese companies to list overseas (Red chips), foreign investment in A shares (QFII) is allowed; "Shanghai-Hong Kong Stock Connect", "Shenzhen-Hong Kong Stock Connect" and "Shanghai-London Stock Connect" allow mainland investors to participate in overseas capital markets more directly...
Some experts advocate faster and more thorough opening of China’s capital market for no more than “accelerating the internationalization of the renminbi”, “reducing international trade frictions”, “forcing domestic economic reforms”, etc., which are listed beautifully in textbooks. However, the real world is full of painful lessons that have rashly opened up capital markets and were bloodbathed by international capital. There are as far as Latin America, Japan, Russia, and Thailand.
After the Asian financial crisis in 1997, scholars with conscience have begun to weigh the pros and cons of fully opening up capital markets in developing countries.
In the 2008 financial crisis that originated in the United States, if China had implemented the free flow of capital, the wealth created by the reform and opening up in the first three decades would be looted.
The opening of China’s capital market still has a long way to go. For a long period of time, there will still be a “wall” to protect our financial security. #Maybe it has to wait until China becomes the world's largest economy, and the rules of the game are set by China#
Hong Kong is China's "window" to the world. After the "wall" is demolished, the "window" no longer exists; if you don't plan to "demolish the wall", you must keep the "window".
Shanghai and Shenzhen "inside the wall" cannot allow capital from all over the world to flow freely. In all aspects of listing rules and regulatory systems, it is impossible to carry out overly radical reforms to maintain policy continuity, let alone copy Nasdaq.
Capital cannot flow freely, supervision is different from Nasdaq, and it is incompatible with companies from all over the world. How can it become "Oriental Nasdaq"? Hong Kong, "outside the wall", once again has a historic opportunity.
Why does the Hong Kong Stock Exchange?
The glory and loneliness of the Hong Kong Stock Exchange will eventually become the past. Its future depends on three factors:
First, high-quality enterprises. The best and most innovative companies in the world’s second largest economy flock to the United States. Now Ali, NetEase, JD.com, and Ctrip have made two IPOs in Hong Kong, plus the listed Tencent, Meituan, and Xiaomi. The camp of high-quality new economy companies on the Hong Kong Stock Exchange is spectacular. There will be more in the future, perhaps Ant Financial, ByteDance.
The second is funding. Capital is profit-seeking. Many high-quality targets are publicly traded on the Hong Kong Stock Exchange. Funds from the United States, Europe, Japan, and South Korea will not want to participate. State-owned financial institutions with huge amounts of capital are absolutely impossible to invest in Nasdaq with hundreds of billions of dollars. Going south to Hong Kong is the platform for Chinese high-tech enterprises, and they can also share the "wealth feast", killing two birds with one stone. In addition, there are private capital seeking high-quality investment targets.
The third is "software." The Hong Kong Stock Exchange draws lessons from and learns from the regulatory system of capital markets in developed countries. In this regard, there is still a gap between the Shanghai Stock Exchange and the Shenzhen Stock Exchange and the Hong Kong Stock Exchange.
With many high-quality companies, sufficient funds, and world-leading financial infrastructure, but also "outside the wall", The Hong Kong Stock Exchange is the promised land of NASDAQ in China.