Caixin
Sep 11, 2020 07:22 PM
FINANCE

U.S.-Listed Chinese Firms Could ‘Better Manage Risks’ Back in Hong Kong, UBS Executive Says

The floor of the New York Stock Exchange on May 26.
The floor of the New York Stock Exchange on May 26.

U.S.-listed Chinese companies that have completed secondary listings in Hong Kong can “better manage risks” and possibly see higher valuations, said the chairman of Swiss banking giant UBS Group AG’s Chinese mainland securities venture.

On Thursday, Yum China Holdings Inc. became the latest U.S.-listed Chinese firm to make a secondary listing in Hong Kong. The operator of KFC and Pizza Hut restaurants on the Chinese mainland followed in the footsteps of internet giant NetEase Inc., and e-commerce superstars Alibaba Group Holding Ltd. and JD.com Inc.

The trend has in part been driven by mounting tensions between Beijing and Washington, which has seen the U.S. threaten to delist Chinese companies from its stock markets.

In 2018, the Hong Kong Stock Exchange revamped its rules to allow companies whose shares are traded on other bourses to list in the city, saying it wanted to “establish a new concessionary secondary listing route.”

Companies securing secondary listings in Hong Kong are mainly regulated by their primary bourses, with little regulation from Hong Kong, Eugene Qian, chairman of UBS Securities Co. Ltd., said in a recent interview with Caixin.

The U.S. remains an attractive destination for IPOs for several reasons. Many Chinese companies in new economy industries can obtain relatively fair valuations in the U.S. by reference to other similar listed companies there, Qian said.

Furthermore, less profitable companies hope to attract investors who understand their business models and characteristics, he said.

However, American lawmakers have sought to step up financial scrutiny of Chinese companies, raising the risk of potential delisting. On May 20, the U.S. Senate approved legislation that would ban any company from being listed on any American securities exchange. Although it applies to all foreign companies, the bill is clearly targeted at China, as there has been a longstanding dispute over U.S. regulators’ access to audits of U.S.-listed Chinese companies.

 Read more 
In Depth: Why Chinese Companies May Get Booted From U.S. Stock Markets

While Qian predicts that some Chinese companies will still choose to go public in the U.S., he also expects some U.S.-listed companies to go public on the Chinese mainland, with the launch of Shanghai’s Nasdaq-style STAR Market and a registration-based IPO reform.

“Listing options will be diversified in the future,” said Qian.

Contact editor Joshua Dummer (joshuadummer@caixin.com)

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