Listing at home is now also more attractive on the background of the increasing tensions between China and the United States. The US Senate has already passed a bill that could ban a lot of Chinese companies accessing the American exchanges.
What reflects this difficult environment Chinese companies are facing from the US government is the fact, that the US market will miss the potentially largest IPO in the world. Alibaba’s Ant Financial aims to go public in Shanghai and Hong Kong. The chinese FinTech company is looking for a valuation of $225 bn USD, based on an IPO of $30 bn USD.
And there is more on the tech market: In July, Hong Kong Stock Exchange already launched the Hang Seng Tech Index. The new index has the focus on China’s technology giants and features 30 of the biggest tech firms listed in Hong Kong. The current top five making up more than 40% of the index are Alibaba, Tencent, Meituan Dianping, Xiaomi and Sunny Optical.
Why the new Hang Seng Tech Index matters for investors
Analysts see Hong Kong’s market strengthened by the new tech index as it might encourage more tech companies to choose the attractive location for raising capital. According to Citi analysts, the new index is likely to draw some interest away from the tech-heavy US-Nasdaq and lead to more turnover at the Hong Kong stock exchange.
Furthermore, there could be index-linked funds issued. First ETFs to track the Hang Seng Tech Index are already on the horizon. According to the China Securities Regulatory Commission two Chinese managers have applied to launch such passive products: China Asset Management and Dacheng Fund Management. However, they will be aimed at mainland China investors.
According to Hang Seng Index company data, the new tech index would have achieved higher returns than the main Hang Seng Index, namely 36.2% and 35.3% for the full year of 2019 and the first half of 2020 respectively. The Hang Seng Index for the same periods reached 10.95% and -2.44%.