WATCH THESE CHINESE STOCK LISTINGS IN THE COMING YEAR
‘Homecomings’ to Hong Kong come amid regulatory pressures
With DiDi Global seeking a listing in Hong Kong less than a year after its tumultuous debut in New York, investors are looking for other U.S.-traded Chinese names that could potentially offer shares closer to home amid regulatory pressures.
Such so-called “homecomings” are a hot topic in the Asian financial hub as U.S. authorities step up demands over disclosures and Chinese officials seek to reel in overseas offerings, citing security concerns. Listing in Hong Kong is seen as an alternative for companies wanting to retain access to global investors while being more palatable to Beijing. It is also simpler and quicker than a mainland deal.
The regulatory threats mean companies with a total market cap of almost $200 billion currently listed only in the U.S. may need to seek a return to Hong Kong or the mainland soon, Bloomberg Intelligence analysts Matthew Kanterman and Tiffany Tam wrote in a note. A list compiled by Bloomberg News includes Pinduoduo and Nio among the largest names.
DiDi could file with the Hong Kong Stock Exchange around March, people with knowledge of the matter have told Bloomberg News.
It is poised to join more than a dozen Chinese companies that have already completed second listings in the city after making global debuts through American depositary receipts, including JD.com and Alibaba Group Holding Ltd.
“Many of the big mutual funds are in the process of or have converted the majority of their ADR exposure into Hong Kong shares for stocks which are currently dual listed, suggesting a natural migration to Hong Kong is taking place,” said Alex Abagian, co-head of Asia Pacific equity capital markets at Morgan Stanley.
Here are the U.S.-traded companies that could come up with homecoming listings in the coming year:
Pinduoduo
The e-commerce operator is the biggest Chinese company by market capitalization listed only in the U.S.
Founded by Colin Huang, it has been one of the few major Internet giants to escape a direct hit from Beijing’s wide-ranging tech crackdown.
The company’s ADRs rose to a record high in New York in February, but have slumped about 70 percent since then amid a sell-off in Chinese shares globally.
Nio
The electric-vehicle maker could be set to follow peers XPeng Inc. and Li Auto Inc., which launched second primary listings in Hong Kong this year.
Nio this month unveiled its second sedan, which will compete more directly with Tesla’s most popular Model 3. Its ADRs are down about 50 percent from their all-time high in February.
KE Holdings
The Beijing online housing platform was a target of shortseller Muddy Waters Research this month. KE said the short seller’s report is “without merit” and that it has authorized an internal review of Muddy Waters’ key allegations. The effect has been minimal on the ADRs, which were already down more than 70 percent from a record high in February.
Kanzhun
The Beijing owner of online recruitment platform Boss Zhipin surged in its U.S. debut in June and has managed to trade well above its listing price since then despite the volatility that has dominated Chinese names.
Its ADRs are up 73 percent since the listing, with a market cap of $13.5 billion.
Tencent Music Entertainment
The music entertainment company, a rival of NetEase’s Cloud Village, debuted in New York more than three years ago. The company is well-positioned to capture a piece of the burgeoning $800 billion metaverse market through its virtual concert business, according to Bloomberg Intelligence.
Its ADRs have fallen 80 percent from a March peak to about half of their 2018 IPO price, with a market cap of $11 billion.
Futu Holdings
The Chinese online brokerage is reportedly planning to file for a Hong Kong listing that could raise about $1 billion. Its ADRs have fallen nearly 80 percent from a February record high, though they’re still trading at about three times their March 2019 IPO price, with a market cap of $6 billion.
IQiyi
The video-entertainment service operator has slumped more than 80 percent since late March, hit by fears that Chinese tech giants would be kicked off U.S. bourses.
The Baidu Inc. subsidiary was said to have picked banks for a Hong Kong second listing, according to a Bloomberg News report in October. It has a market cap of $3.9 billion.