American Chinese stocks are an important part of Chinese listed companies, especially overseas Chinese stocks. According to Wande statistics, there are a total of 263 listed Chinese stocks in the United States (excluding state-owned enterprises listed in Hong Kong), with a market capitalization of US $1.62 trillion, accounting for about 9% of the total Chinese companies and about 29% of overseas Chinese shares. Concentrated in the Internet, education, technology and other new economy industries.

Return to 13, Hong Kong accounts for 16.6%

At present, there are three main ways for Chinese stocks to return to Hong Kong, namely, direct listing in Hong Kong after privatization and delisting (for example, China Feihe Limited), dual listing of Hong Kong stocks and US stocks (such as BeiGene, Ltd.) and secondary listing of Secondary listing through listing (such as BABA, etc.).

Due to the large scale of the redemption fund needed for direct privatization and delisting, and the high cost and long time for the delisting of Chinese stocks with complex ownership structure and a high proportion of foreign shareholders, dual major listing needs to meet the regulatory requirements of the two markets at the same time, which undoubtedly increases the compliance cost of enterprises.

Therefore, the secondary listing of US stocks in Hong Kong while retaining the listing status of US stocks has become the first choice and mainstream for the return of US-listed stocks. In particular, since the revision of the listing system in 2018, the threshold for New economy companies to list in Hong Kong has been lowered, so that Chinese-listed stocks can return quickly and easily.

Since the revision of the listing system of the Hong Kong Stock Exchange in 2018, 13 US-listed Chinese stocks have retained their listing status while returning through secondary listing in Hong Kong, focusing on consumption, information technology and health care.

At present, the rhythm is still accelerating. Through the analysis of 13 companies, we found the following characteristics and impact:

1) share: a considerable part of the shares have been converted to Hong Kong stocks for trading. We estimate that the market value of some transactions in Hong Kong is HK $1.31 trillion, accounting for 16.6% of the total market value, of which BABA and JD.com have reached 21% and 17%.

2) transaction: the transaction proportion of most companies in Hong Kong is higher than their market capitalization and shares in Hong Kong, reaching 18% as a whole, indicating that the turnover of Hong Kong stocks is relatively more active.

3) Stock price: there is no obvious revaluation after the secondary listing, and the price difference between Hong Kong and the United States can be ignored in the long run.

4) influence: take the lead and agglomeration effect to strengthen the status of the Hong Kong stock market as a bridgehead of the new economy and an international financial center.

External pressure, institutional convenience and aggregation effect will jointly promote the return of more Chinese stocks.

In the face of external uncertainty, for qualified Chinese companies, secondary listing does not have much additional costs for enterprises, and the same shares and the linked exchange rate system in Hong Kong also minimize the disturbance of secondary listing to the main body of the United States.Therefore, choosing to return is a backup plan with "100 benefits but no harm".。

The HKEx is welcoming Chinese companies to list in Hong Kong with a more open and inclusive attitude, and a more optimized listing system will facilitate the return of Chinese stocks.

The HKEx recently solicited market opinions on further relaxing the listing rules for overseas issuers to facilitate the return of more companies.

On March 31, the HKEx further proposed a consultation document on optimizing and simplifying the listing system of overseas issuers in Hong Kong, proposing to substantially relax the restrictions on secondary listing of Chinese stocks in Hong Kong, so as to attract more companies to list in Hong Kong.

The most eye-catching suggestions include removing the restriction on innovative industries that require companies with the same share and equal rights structure in the secondary listing requirements to attract high-quality traditional industries; dual major listed companies can retain different voting rights (WVR) structures, variable interest entities (VIE) structures, and can still retain their different voting rights structures even if they are delisted overseas in the future.

At the same time, regression also has positive feedback effect. With the institutional reform in Hong Kong, the optimization of the interconnection mechanism, and the listing of more and more high-quality leading companies in Hong Kong, especially the secondary listing of Internet giants in Hong Kong, Hong Kong has gradually formed a unique ecology of "no one has anything". It has changed the new and old structure of the Hong Kong market, enriched the listing resources of the Hong Kong market, and enhanced the overall liquidity of the Hong Kong stock market.

The Hong Kong stock market gradually converges the high-quality leading companies of China's new economy, and the effect of the "bridgehead" and gathering place gradually built into a new economy has a strong demonstration effect on attracting more listed companies and investors.

What other Chinese stocks are likely to return?

Chinese stocks seeking major or dual major listings in Hong Kong must abide by all relevant listing rules of the HKEx. Chinese stocks that are mainly listed on eligible listed exchanges and seek secondary listing in Hong Kong can have a certain exemption from the listing rules.

Secondary listing requires listed companies to retain the current VIE structure and different voting structures to meet certain requirements (listed sector, listing time and market capitalization scale), etc., and provide guidance for companies that meet the requirements and want to return to the Chinese market for financing.

The details are:

1) must be listed on an eligible listed exchange (New York Stock Exchange, NASDAQ Stock Market or London Stock Exchange main Market) and maintain a good compliance record for at least two full fiscal years

2) the market capitalization is at least HK $40 billion at the time of listing, or at least HK $10 billion at the time of listing and at least HK $1 billion in the most recent audited fiscal year.

In accordance with the above rules and requirements, we have combed the US-listed Chinese stocks, excluding those listed in Hong Kong, there are nine companies with a market capitalization of more than HK $40 billion; among the other Chinese stocks, there are 10 companies with a market capitalization of HK $10 billion and an annual income of HK $1 billion. As a result, there are currently 19 fully qualified companies with a total market capitalization of about HK $2.33 trillion, or US $300.3 billion.