With ASEAN companies [1] increasingly seeking overseas listings, Hong Kong, one of the most renowned international financial centres in the world, has emerged as a popular locale for achieving such aim. Currently, 84 [2] ASEAN-headquartered companies are listed on Hong Kong Stock Exchange (HKEX), representing a total market capitalisation of approximately US$15.3 billion [3] across a diverse portfolio. In terms of sectors [4], the listed ASEAN companies are primarily engaged in consumer discretionary, property / construction, information technology, and industrial businesses.
In addition to Hong Kong, the US and Singapore are also popular overseas listing destinations for ASEAN firms. Of the two, the New York Stock Exchange (NYSE) and Nasdaq are the preferred listing destination for larger ASEAN companies, especially those in the big tech sectors, while, on proximity grounds, the Singapore Stock Exchange (SGX) is more attractive to Malaysian companies. For its part, Hong Kong is the most appealing venue to ASEAN companies in general, with the largest number of ASEAN companies in a good variety of sectors and size when compared to other stock markets outside ASEAN. [5]
Hong Kong’s Appeal for ASEAN Companies Listing Overseas
In order to understand how Hong Kong can better serve ASEAN companies’ listing needs, HKTDC Research conducted a series of in-depth interviews with industry practitioners from October 2021 to January 2022. This led to the interviewees’ perception of Hong Kong as an overseas listing destination for ASEAN companies being summarised under the following five headings:
- Good market breadth and depth resulting in better fund-raising
With a stronger IPO track record and more active secondary market, HKEX provides better fund-raising prospects for ASEAN companies than their local stock exchanges. - Efficiency and flexibility in funding overseas investment
Hong Kong’s strong talent pool and well-connected worldwide network facilitates efficient listings. Its robust legal system, along with the absence of both exchange and capital controls, are advantages that matter to ASEAN companies considering a listing. - Access to a larger and more diversified investor pool and as a doorstep to expansion in the GBA and the mainland China
Hong Kong’s huge international investor base, including both financial and strategic investors has a rich experience and strong interest in Asia and mainland China-related projects, and is seen by many ASEAN companies as a step on the ladder to further expansion within the Greater Bay Area (GBA) and elsewhereon the mainland China. - Proof of good governance helps improve corporate image
Listing on HKEX is a strong signal of an ability to maintain an international level of high-quality corporate governance. - Proximate time-zones with ASEAN countries provide extra convenience
Hong Kong is not only the most developed international financial centre near to ASEAN, but also shares the same or similar time-zones with ASEAN countries, adding convenience to company executives and investors.
Key Challenges for ASEAN Companies Seeking a Hong Kong Listing
Interviewees also highlighted several challenges that ASEAN companies may face when seeking a listing in Hong Kong:
- Mainland China and GBA projects tend to draw more investor attention than other Asia projects
Despite this perception, with growing economic links between GBA and ASEAN, as well as the rising opportunities from the recently implemented RCEP, investor interest related to financial investment in ASEAN companies is expected to increase. - Some ASEAN companies perceive Hong Kong as focused on high-profile deals
Hong Kong generally welcomes companies of different sizes for listing, and is keen to list high quality companies. While some interviewees remarked that Hong Kong tends to focus on high-profile deals, others commented that ASEAN companies with smaller market capitalisation are also well-represented among companies listed on HKEX, due to its greater accessibility. New initiatives, such as the SPAC regime in Hong Kong, generally offer shorter timeframes and more flexibility for companies to list on HKEX, which may further facilitate ASEAN companies looking to list in Hong Kong.
Recommendations
During the course of the survey, many of the interviewees made recommendations as to how Hong Kong could better facilitate ASEAN companies’ funding needs and enhance its position as an overseas listing destination. Among the key recommendations were the following:
- Strengthen promotion in ASEAN countries in order to address misconceptions and raise awareness among companies regarding the latest market environment and regulatory regimes in Hong Kong.
- Target ASEAN companies in prevailing and emerging sectors: Asked to identify Hong Kong’s strengths, interviewees designated several particular sectors:
- BioTech has been an economic development priority for many ASEAN economies, and the COVID-19 pandemic has drawn more investors’ attention to this sector. HKEX is an important hub for the listing of biotech and healthcare companies, and has introduced special concessions making it easier for pre-revenue biotech companies to list.
- New economy and high tech are two of the fastest growing sectors in the ASEAN region, with a number of notable IPOs completed in recent years. Hong Kong’s streamlined regime for overseas listing, as well as its new SPAC regime, is seen as better able to facilitate ASEAN companies in the high-tech sectors.
- FinTech prospers in many of the ASEAN countries amid the COVID-19 pandemic, unlocking new opportunities for financial institutions. Hong Kong’s new SPAC regime could provide a platform for ASEAN FinTech companies looking for fund raising and expansion.
- Green sector: Global and ASEAN governments have set clear net zero targets, with many ASEAN companies now seeking funding for their green and ESG projects. With Hong Kong having established itself as Asia’s key green and sustainable finance hub, the city is considered well placed to respond to the rising need for ESG funding in the ASEAN region.
- Consumer goods and services are fast growing sectors in ASEAN, benefiting from rising middle-income class and rising income. Some of the brands are ready for overseas expansion, and listing in Hong Kong could open the door to the mainland market.
- Mining and commodities remain important sectors for ASEAN’s rich economies. Listing in Hong Kong could help them to access funding and expand their customer base in the mainland.
- REIT listings in South-East Asia have undergone rapid growth in recent years. Consequently, Hong Kong’s recent moves to provide more listing incentives for REIT should have a strong appeal.
- Hong Kong can enhance collaboration with ASEAN exchanges in order to promote dual primary / secondary listings: With RCEP having come into effect as of 1 January 2022, closer regional economic integration will drive the need for many projects to be funded throughout the bloc, particularly with regard to ASEAN companies’ projects on the mainland and vice versa. In such cases, Hong Kong is in an ideal position to serve as a platform for satisfying two-way funding needs. By working with ASEAN stock exchanges to facilitate ASEAN companies’ dual or secondary listings on HKEX, financial bodies will be better able to capitalise on the growing opportunities.
The extra chapter discussed the listing of Malaysian companies in Hong Kong. The HKEX has the largest number of Malaysian companies listing outside ASEAN, and is perceived as a prestigious destination among key stock exchanges. With further economic development in Malaysia, as well as economic integration in the region by RCEP, Hong Kong could satisfy Malaysian companies’ funding needs for regional expansion and mainland China investors’ interest in Malaysian companies, while Malaysia’s fast-growing IT sector and growth companies could be potential candidates for HKEX listing.
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Source: HKTDC Research
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[1] ASEAN companies in this study are defined as businesses headquartered or incorporated in the ten ASEAN countries, unless otherwise specified
[2] Rough estimates compiled with Refinitiv data, supplemented by data from Bloomberg and TradingView. as at 15 December 2021
[3] Same as 1
[4] Compiled by HKTDC from public information disclosed by HKEX
[5] Comparison by using Refinitiv data