Lead:
In a mature market environment, both optimistic and pessimistic market sentiment translates directly into stock price fluctuations.
In the past 2022, the A-share market experienced a wave of breakdowns, with Wind data showing that of the 2022 IPOs in 428, 143 companies broke on the first day of listing; The total IPO financing of US stocks in 2022 decreased by 93.07% year-on-year, and the scale was generally small, most of which were less than US$0 million; KPMG gave the global IPO financing data of US$5 billion in 2022, a sharp decline from US$1800 billion in 2021.
Under the influence of the Ukraine crisis, the Federal Reserve's interest rate hike, and soaring global prices, whether to go public and where to go public has become an uncertain question for companies standing in 2023.
The turbulence of the global capital market has also been transmitted to the Hong Kong capital market, but Hong Kong has shown relative resilience. According to Wind data, total funding in the Hong Kong stock market fell 68% from the previous year, at the lowest level in the past decade. Deloitte's "Chinese mainland and Hong Kong IPO Market 2022 Review and 2023 Outlook" report also pointed out that compared with the US stock market, Hong Kong's annual IPO financing scale still ranks fourth in the world, behind the Shanghai Stock Exchange, Shenzhen Stock Exchange and Korea Stock Exchange, and surpassing the NASDAQ and NYSE.
Standing in 2023, how should the listing place of the capitalization road be decided, whether the Hong Kong stock market still maintains a dominant position today, and what kind of underwriter services can better match the current IPO method? As Christopher Smart, chief global strategist at Barings, puts it, "We all welcome the new year with a certain level of humility." If there's one lesson to be learned, be prepared for more surprises. How should we embrace change? We'll take a look at a little bit in this article.
First, the big Easter egg of the Hong Kong Stock Exchange facing the world, the return of Chinese concept stocks
"Hong Kong remains the only city in the world that brings together global and Chinese advantages. This unique blend makes us an irreplaceable platform for connecting the Mainland and the rest of the world. Hong Kong Chief Executive John Lee Ka-chiu said at the International Financial Leaders Investment Summit, dubbed "Hong Kong is back."
In fact, during the Li Xiaojia period, the Hong Kong Stock Exchange established the basic policy of "basing itself on China and connecting the world". In the former, since China's formal accession to the WTO, the proportion of Chinese stocks in Hong Kong stocks has become higher and higher, and Hong Kong Stock Exchange statistics show that H-shares and red-chip stocks accounted for 13.84% of the total Hong Kong stock market value from 1998.20% (40) to 17.7% on the 9th anniversary of Hong Kong's return to the motherland, and the market value of listed companies on the Hong Kong Stock Exchange increased by <>.<> times. Hong Kong's capital market is one of the biggest beneficiaries, and this is the return of "Based on China".
In the latter, the Easter eggs brought by "connecting the world" are even more prominent today.
The inflection point occurred in May 2020, when the US Senate unanimously passed the Foreign Companies Accountability Act, so in order to seek stability, the return of Chinese concept stocks occurred simultaneously, and in 5, 2020 companies were listed in Hong Kong for the second time, including new economy companies such as NetEase, JD.com, and Parkson China.
Hong Kong's capital market has become the best place to land in this changing external environment. First of all, due to the low switching cost between US ADR and Hong Kong stocks, in the long run, choosing Hong Kong and US stocks to list at the same time can play a role in hedging risks; Secondly, another significance of "spring planting and autumn harvest" is that the reform of the listing system implemented by the Hong Kong Stock Exchange in 2018 has become the reason why new economy companies choose to return to Hong Kong today.
In 2022, the Hong Kong Stock Exchange once again lowered the threshold for secondary listings, abolished the requirement that the secondary listing of Greater China issuers with weighted rights structure must be an innovative industry company, lowered the market capitalization requirements for secondary listings, provided guidance for companies that have already been listed on secondary listings, and companies with weighted rights and VIE structures with the option to directly apply for dual primary listings, etc.
Therefore, the option of Chinese concept stocks to return to Hong Kong is more obvious in 2022. In 2021, only 7 Chinese concept stocks returned to Hong Kong for listing, and in 2022, this number will increase to 11. What is more significant is that at the end of March, Alibaba announced the spin-off into six major business groups, and after the spin-off, each business will be listed independently when the conditions are met. JD.com followed with an announcement that it planned to spin off its JD.com Sanfa and JD.com Industry to be listed independently on the main board of the Hong Kong Stock Exchange.
Some insiders judged that the spin-off strategy may be the same strategy of the next Internet companies, and what happened at the same time is that the RMB denomination of Hong Kong stocks has advanced rapidly since this year, and if Hong Kong stocks pass through this round of dollar tightening cycle, it may bring a new round of opportunities for Hong Kong stocks.
In addition, Hong Kong Chief Executive John Lee visited Saudi Aramco, the world's largest petrochemical company, during a trip to the Middle East in February this year, and said that the Hong Kong Stock Exchange welcomed the company's secondary listing in Hong Kong, which helped the flow of business between the two places and also boosted investor confidence.
CICC also pointed out in its May report last year that 5 companies are expected to meet the conditions for returning to Hong Kong stocks in the next three to five years, and the average annual new financing size may reach HK$42.3 billion.
For enterprises, the most direct and convenient way to obtain capital is to list in their own consumption and business markets, and then place shares to institutional investors around the world, which makes it easier for investors and regulators to understand the company, reduces misinterpretation, and makes compliance costs more controllable. He Li, a partner at Davis Polk & Wardwell, a top Wall Street law firm, once said: "Except for Chinese concept stocks, there has never been such a phenomenon in human history, a large number of companies in one country run to another country's securities market to raise funds, just like the great migration of animals." ”
Due to globalization, political difficulties and the search for the development of emerging industries, Chinese companies in the second decade of the 21st century choose to build bridges and cross the river with the structure of VIE, "but now is an uncertain moment," He Li said, the world across the river is not necessarily the best place for the long-term stable development of enterprises, so more people choose to return to their birthplace at this moment.
As mentioned at the beginning, preparing for more surprises, the trend of the return of Chinese concept stocks is another safe haven for companies to embrace uncertainty, and the best port Hong Kong market is bound to become increasingly flourishing in the process.
Second, return to the center of the world stage
The cold and warm changes in the secondary market are inseparable from the real economy, and the bustling streets and the flow of people are the external manifestations of the upward trend of consumption, and this recovery is also directly reflected in the changes in the stock market.
The movement of the stock market depends on assets and funds. For Hong Kong stocks, the asset side is dominated by Chinese mainland enterprises, and the degree of recovery of the mainland economy is directly related to the profitability of listed companies. Since January, as the impact of the epidemic has faded, the mainland economy has begun to pick up.
On the capital side, Hong Kong stock investors are mainly foreign institutional investors, and geopolitics and the Fed's interest rate hike will affect the flow of funds. Therefore, under the expectation of good earnings of technology companies, the pessimism of foreign capital has also been alleviated. In January, the Hang Seng Index rose from close to 1,2000 points to more than 2200,10 points at the end of the month, up <>%.
In addition, in October 2022, the Hong Kong Stock Exchange issued a consultation paper on the listing regime for specialised technology companies in Hong Kong, proposing to add Chapter 10C to the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules"), relaxing the revenue and profit thresholds for specialised technology companies under the Listing Rules with a view to attracting hard technology companies to list in Hong Kong. To some extent, the new listing regime is part of the Exchange's ongoing diversification reforms since 18 to enhance the globalisation of financing platforms and strengthen Hong Kong's status as an international financial centre.
This means that geopolitics, the Fed's interest rate hike, and the Chinese mainland economy, the three core elements that affect the trend of the stock market, are currently completing the bottom to a certain extent. In terms of changes in Hong Kong IPOs, there were 2023 IPOs in January 1, and 10 companies rose on the first day, which is a significant improvement compared to January 5 (a total of 2022 companies were listed and only one closed up on the first day).
Wong Weibang, PwC Hong Kong Corporate Client Leader, said that if the trend of special technology companies listing in Hong Kong in the future will form, it cannot be ruled out that the Hong Kong stock market will be benchmarked against the A-share Science and Technology Innovation Board and the NASDAQ in the United States. Facing 2023, a number of industry insiders said that Hong Kong is still one of the top choices for corporate financing, and with the relaxation of epidemic prevention and control in the mainland and the slowdown in the pace of interest rate hikes in the United States, 2023 is expected to be a year of recovery in Hong Kong stock IPOs, and Hong Kong is returning to the center of the world stage.
In the animal kingdom, whales migrate more than 20,000 kilometers per year, the longest migration route of all mammals, and this long journey is to find suitable waters to breed and grow. Similar to animal instincts, in the business world, if companies can follow the flow of assets and funds, choose the right destination, they will also be able to find a suitable destination for the growth of the enterprise.
The difference is that ships sailing at sea not only need to hold the steering wheel themselves, but also need masts to ensure safety and stability during navigation. On the road to listing, the role of the underwriter is an enabler, which can be a mast to control risks and a searchlight for finding the direction ahead.
In the Hong Kong financial market, Futu Securities is the largest technology broker in Hong Kong based on the number of retail customers, the scale of assets under custody and the trading volume. According to Wind data, in 2022, Futu ranked first in the number of underwriters by acting as an underwriter of 41 Hong Kong IPOs (including as sponsor, underwriter, global coordinator, bookrunner and intermediary of the manager), and the cumulative number of IPO clients served exceeded 200.
Among them, 2022% of the companies with a market value of more than HK$1000 billion on the first day of listing in Hong Kong capital market in 100 (excluding introduction listings) chose to cooperate with Futu; Among the top 10 companies in terms of annual financing scale, 6 are Futu's IPO cooperation customers, among which the top 3 fundraising - China Exempt, Tianqi Lithium and China Innovation Airlines are all Futu IPO cooperation customers. In addition, in terms of public subscription amount, the subscription amount of Futu platform far exceeds that of other similar brokers, and even more than double the second place.
At a time when the Hong Kong market is returning to the center of the world stage, those who go with the flow also need to cut through the fog and find a suitable route for their own home.
Third, the anchor of supply and demand balance, whose grip?
So, what are the needs for companies to go public at this stage?
Different from the medium- and long-term investment of institutional investors, the voting rights of stock liquidity actually depend more on individual investors, and the trading of stocks by individual investors helps to improve the liquidity of stocks. The purpose of companies seeking capital paths is not only to raise the demand in the public market, to make the money they need active, but more importantly, to increase stock liquidity.
Therefore, the role of the enabler plays a more important role in the journey of enterprises to seek capital path. Especially for enterprises seeking to be listed at this stage, while the instability of the external environment is increasing, more and more technology companies that need large R&D investment have appeared, if the stock liquidity is exhausted, it is equivalent to the company stranded in the capital market, and the purpose of fully using the capital market for financing development cannot be achieved after listing.
Therefore, more needs for enterprises to seek capital paths are seen and recognized by investors in the secondary market, and IR and PR work in the listing process becomes more important. Through continuous insight into the needs of enterprises, we can better help the development of corporate physical business from the capital level. This is also the performance of the IPO process, where enablers can keep up with the pace of the times and provide service supply that matches the demand of the IPO, helping the real economy.
The key to solving this problem is to build a bridge between enterprises and individual investors, effectively play the role of PR and IR, and accurately let individual investors pay attention to the required information, so that the information exchange between the two sides can be more efficient and accurate. In response to this pain point, in January 2019, Futu took the lead in launching the Enterprise Number service, which helps enterprises do a good job in value transfer with investors by building an online communication platform, providing multiple IR and PR values.
Specifically, the enterprise number provides a wealth of communication forms, covering graphics, dynamic information, video live broadcast, telephone conference and other ways, different from the traditional, one-way investor relations website, diversified communication can increase the interaction between investors and enterprises, fill the cognitive differences of investors in different markets due to information asymmetry, and realize complete external information transmission in the listing process.
In addition, Futu Enterprise also provides product business display function, which can directly display the company's latest products on the homepage of the enterprise number, so that individual investors can directly understand the company's product capabilities and realize the brand promotion on the PR side of the enterprise. At the same time, the enterprise number can also carry all IR/PR content exclusively, and directly connect with the individual stock market page, so that potential investors can achieve a complete closed loop between the value perception of the enterprise and the real transaction.
According to Futu's official data, as of Q2022 4, more than 1500,10 investment institutions, financial media, and listed companies have settled on Futu's platform. This can build a bridge between individual investors and enterprises, and actually comes from the massive user community resources brought by Futu's accumulation of more than <> years in the C-end brokerage business.
With the support of a huge number of users, Futu continues to communicate, track and respond to feedback with investors, which not only feeds back Futu's corporate services and institutional business, but also builds a complete investor ecology, making Futu an investment platform that best understands the needs of investors. According to an employee from Futu Social Center, many Futu users who are professional investors directly choose Futubull's results live broadcast to listen to the company's performance meetings, and abandon the traditional telephone access form. "Because they think that functions such as live streaming and simultaneous interpretation in the app will be more convenient and easy to use." The employee said.
In Q2022 4, Futu added industry roundtable meetings and interactive topics with prizes, with more than 900 live broadcasts of financial reporting season activities and more than 500 participating companies.
Like all market economies, capital markets need to maintain a balance between supply and demand. From the perspective of demand, the demand for the listing of enterprises is not a time point in time for the success of ringing the bell, but also a long-term timeline that can generate activity in the capital market, from the supply point of view, Futu Enterprise provides enterprises with official certification, brand protection, brand influence expansion, free online roadshow, company individual stock information maintenance, company news and official manuscript release, official account content synchronization and enterprise product business display and other functions, just like a whole ecosystem that can make the time point move.
More and more enterprises, institutions and media are favored to fill different roles in the investment ecosystem, and in essence, on the massive user base deeply cultivated in Hong Kong and facing global investors, there is the "understanding" demand of Futu Enterprise Services for enterprises seeking capitalization. In fact, the capital level is only a side dimension in the development of enterprises, and at the beginning of the establishment of Futu Enterprise Service Business, the purpose is to stand in the perspective of enablers, constantly explore and gain insight into the needs of enterprises, in order to truly help the development of the real economy and make the capitalization road, a key node in the development process of enterprises, play a more effective role.
Chaos is a ladder. British Prime Minister Winston Churchill at the end of World War II once said, "Never waste a good crisis." In 2023, if the pendulum of the capital market once again shakes to the Hong Kong market, then enterprises with tentacles to meet demand also happen to have the grasp of opportunities. (End)