An ongoing disagreement regarding accountancy practices for overseas companies listed in the US appears to be benefiting Singapore and Hong Kong stock exchanges. Electric vehicle start-up, Nio, is the most recent to apply for an alternative listing, with Singapore the chosen destination. This is just the latest in a growing list of tech giants such as JD.com, Pinduoduo, Tencent Music Entertainment and NetEase, which are "coming home".
This move will likely encourage execution only day traders who have tended to focus on the often volatile technology sector. But, will there be a knock-on effect?
Will change fuel domestic interest?
When many of Hong Kong and China’s tech giants decided to look elsewhere, there was disappointment. However, there are signs that more traditional companies and tech giants are considering “returning home”. Some of the potential benefits include:-
Investors have more understanding of the business
Many APAC based investors have a greater understanding of Hong Kong/Chinese-based tech companies than some overseas investors. Consequently, numerous experts predict increased interest in these companies.
Greater liquidity
An increase in interest amongst execution only day traders/long-term investors will ultimately lead to greater liquidity. This should then encourage institutions to be more active and partake in new flotations and fundraising. In addition, the use of cutting-edge clearing and custody services will support the expected increase in liquidity.
Local start-up listings
Historically, many Chinese/Hong Kong tech and traditional start-ups have looked towards the US for funding. However, this trend is changing, with companies now looking at primary and secondary listings in the region. The hope is this will ultimately encourage future start-ups to list locally. There are high hopes for the coming years in what could become a self-fulfilling prophecy.
Overseas interest
It is common knowledge that the Chinese authorities have been loosening historical restrictions on overseas investment and Chinese-based company fundraisings. In addition, the introduction of the "Connect" system has encouraged execution only, managed and institutional clients to revisit the area. As a result, there are now viable opportunities for true global diversification and the ability to deal directly in Hong Kong and Chinese stocks.
Trade execution
In recent years we have seen considerable improvements in trading platforms, lower latency execution only trade services, and more significant activity from overseas investors. While part of the GIS UK Group, GIS HK Ltd has a strong and growing presence in Hong Kong with deep-seated knowledge of local markets. Our constant and ongoing investment in new technology, new trading platforms and more extensive clearing and custody services has allowed us to grow. Consequently, we have maintained an extremely competitive charging structure, a magnet for many new clients.
Is Hong Kong/China set to become more influential?
The return of some of the region’s best known traditional and technology companies has gone down well with execution only investors and those with managed funds. This corresponds with a loosening of overseas restrictions and more mainland China companies seeking a listing in Hong Kong via the “Connect” system.
While the NASDAQ remains the leading technology index, there are high hopes that Hong Kong/China will have a growing influence in this investment area. Highly efficient clearing services and lower latency execution only platforms will be critical in the future. So, are we about to experience a resurgence in the APAC technology sector?