According to the April 7 report released by Ernst & Young, several companies in TMT (Technology, Media & Entertainment, and Telecommunications) industries have tried a secondary listing on the Hong Kong stock exchange while maintaining the listing status on the U.S. stock market.
In 2019, only one TMT Chinese concept stock was listed in Hong Kong after the exchange reformed its listing regulations for 2018. That was Alibaba.
The year 2020 witnessed 5 TMT Chinese concept stocks listed in Hong Kong for the second time.
Last year, the momentum of the secondary listing of Chinese stocks in Hong Kong continued, with five more companies. They are Autohome, Baidu, Bilibili, Ctrip, and Weibo.
The secondary listing of 11 companies has raised more than 220 billion Hong Kong dollars ($28 billion).
According to the Ernst & Young report, 223 Chinese companies were listed and traded on major U.S. stock exchanges as of March this year. TMT companies account for more than 50%, with 114 firms. In terms of market value, the overall market value of TMT companies exceeded $565.7 billion.
The report indicated that the market value of 223 Chinese concept stocks plunged more than $1 trillion from the high recorded last year. This slump is mainly due to the U.S. regulatory restrictions, the COVID-19 pandemic, and the conflict between Russia and Ukraine. In addition, the market value of 114 TMT stocks also dropped more than 29% from last year’s high.
From last year to March 2022, 13 TMT Chinese concept stocks were delisted in the U.S.
According to Zhang Weixiong, a partner in charge of consulting services in TMT at Ernst & Young Greater China, multiple factors have pushed Chinese TMT concept stocks to return to Hong Kong for a secondary listing.
They include the increasing uncertainty of foreign capital markets, more stringent U.S. regulatory scrutiny, more relaxed conditions of Hong Kong Stock Exchange’s listing system, and an optimized investment and financing environment in Hong Kong.
Besides, the domestic policy environment continues to improve. The recognition of the value of TMT high-tech companies is also a vital driving force for TMT Chinese concept stocks to pursue a secondary listing in Hong Kong.
Li Kang, Senior Manager at Ernst & Young Beijing, stated that it is foreseeable that more TMT Chinese concept stocks will re-examine the Hong Kong stock market. Underlying factors include:
Hedging uncertain risks in the U.S. stock market.
Diversifying the shareholder structure.
Maintaining a stable market value.
At the same time, with the continuous improvement of domestic policies and listing systems, the attractiveness of the market environment has gradually improved.