Trip.com, a veteran company in the online travel industry, became the fourth Chinese stock to return this year with the sound of a gong for the listing of Hong Kong stocks. In March, three Chinese stocks, Autohome Inc, Baidu, Inc. and Bilibili Inc., have successively landed in Hong Kong. As of the same day, 14 Chinese-listed companies have been listed in Hong Kong for the second time. Anjuke, the real estate information platform owned by 58.com, also submitted an application to the Hong Kong Stock Exchange for listing, less than a year after 58.com delisted from the privatisation of US stocks.
People in the industry generally believe that the sentiment generated by the market towards the politicization of securities regulation in the United States, superimposing the advantages of Hong Kong stocks in terms of financing costs and investor structure, will prompt more Chinese stocks to choose Hong Kong stocks for secondary listing.

CITIC predicts that in the next three years, the Hong Kong stock market will accelerate the return of Chinese stocks and usher in the centralized return of about 40 Chinese stocks.

Chinese stocks are eager to return home.

"one of the advantages of listing Hong Kong stocks is that you can ring the bell without giving up sleeping. On the morning of April 19th, Liang Jianzhang, co-founder and chairman of Trip.com, appeared at the company listing ceremony in high spirits and began his speech with a joke. The founder, who had been absent from Trip.com 's US stock listing due to jet lag, sounded the gong for the company's second listing in Hong Kong.

Shortly before Trip.com 's return, three domestic Internet iconic companies, Baidu, Inc., BABA and Tencent, had just gathered in the Hong Kong stock market. At that time, Li Yanhong, founder and chairman of Baidu, Inc., lamented: "I finally got what I wanted!" We're home! "

Behind the listing of Baidu, Inc. and Trip.com in Hong Kong one after another is the accelerated return of Chinese stocks. Recently, it has been reported that NIO Inc. Automobile and XPeng Inc. have submitted listing applications to the Hong Kong Stock Exchange.

Corresponding to the frequent news of the return of Hong Kong stocks, Chinese stocks have become more volatile in the US stock market since March.

The Securities and Exchange Commission (SEC) announced on March 24th that SEC had passed the final amendment to the Foreign Corporate Accountability Act and solicited public opinion. As soon as the news was released, the share prices of popular Chinese stocks suffered a sharp fall on that day.

Once SEC's recent policies on accounting and auditing are implemented, if Chinese stocks fail to provide up-to-standard information, there will be a high risk of delisting in the United States. Zheng Lei, chief economist of Baoxin Financial, said that in this context, the secondary listing of Hong Kong stocks will become a "safety pad" for Chinese stocks. "it is believed that many Chinese stocks have contingency plans for secondary listings in Hong Kong. "

Although NIO Inc. Automobile and other companies mostly do not comment on the market news, there are still traces of the eagerness for the return of US-listed stocks. On March 26th, Bilibili Inc. made an own mistake in the company information form document disclosed on the Hong Kong Stock Exchange, mistakenly writing the name of the home page as "Baidu Co., Ltd.". According to the reporter, among the legal advisers for the listing of Hong Kong shares of Bilibili Inc., Baidu, Inc., Trip.com and other enterprises, there is "Shida International Law firm."

Wang Bin, a lawyer who has participated in a number of Hong Kong stock IPO projects, said that this incident may be related to the tight timetable for the return of Chinese stocks. The preparation period for the return of US-listed stocks is nearly half shorter than that of ordinary IPO projects. Once the number of return-to-market projects increases, it is easy for law firms and other institutions to make mistakes.

The return project of Chinese stocks is becoming a "battlefield" for domestic securities firms to compete fiercely. Take Bilibili Inc. as an example, among his joint bookrunners and co-lead managers are CITIC, Haitong International, China Merchants International, Jianyin International, Guotai Junan International and other domestic securities firms. According to a person in charge of a domestic securities firm who participated in a number of Chinese stocks returning to the IPO project, he said: "the business has been particularly busy recently." "

HKEx takes the initiative to seek change

The return of US-listed Chinese stocks is becoming a bright spot in the Hong Kong stock IPO market. In the IPO project forecast schedule of Hong Kong stock trading platform service provider Jieli Trading Bao, 11 US-listed stocks are expected to return from April to July alone, including iQIYI, Inc., Tencent Music, Sina Weibo Corp and so on.

This wave of return is closely related to the initiative of the HKEx to seek change in recent years. In April 2018, the HKEx revised its listing rules to allow eligible mainland companies to re-list in Hong Kong and biotech companies with different rights or unprofitable shares to be listed on the main board of Hong Kong shares.

The new rules open a new chapter for the Hong Kong stock market. In the past two years, in addition to the successive return of BABA, Baidu, Inc., Bilibili Inc. and other companies, well-known new economy companies such as Kuaishou Technology, JD Health, Meituan and other well-known new economy companies have unanimously placed IPO destinations in Hong Kong stocks. "for Chinese stocks, Hong Kong stocks are closer to major markets and major investors, and can provide access for mainland investors to participate, and the financing cost is also relatively low. Shen Meng, executive director of Xiangsong Capital, said.

The liquidity problem of the Hong Kong stock market has also been greatly improved in recent years. On the one hand, the opening of the Shanghai-Shenzhen-Hong Kong Stock Connect has brought a large amount of capital; on the other hand, structural changes such as the optimization of the Hang Seng Index, the landing of the Hang Seng Science and Technology Index and the increase in the number of new economy companies are also attracting overseas active and passive capital inflows.

The influx of capital has greatly activated the Hong Kong stock market, creating a good environment for the return of Chinese stocks. "New economy companies have gathered in Hong Kong stocks to make international investors in the new economy pay more attention to this market. This makes the secondary listing of Chinese stocks in Hong Kong can raise a sum of capital at a better price. Senior investment bankers said.

At the same time, HKEx is also trying to facilitate the return of US-listed stocks with a more optimized listing system. On March 31, the HKEx submitted a consultation document proposing a substantial relaxation of the restrictions on the secondary listing of US-listed Chinese stocks in Hong Kong. These include plans to remove the qualification restrictions for "innovative enterprises" and allow the return of US-listed stocks that operate in traditional industries and do not have different voting structures.

In addition, the HKEx also plans to lower the threshold for the market capitalization of secondary listed Chinese stocks. In other words, in the absence of a different voting structure, overseas listing has a market value of more than HK $3 billion for five full fiscal years, or an overseas listing for two fiscal years with a market capitalization of more than HK $10 billion.

The above public consultation will end on May 31. The HKEx expects that as of March 29, about 18 Chinese stocks will meet the reduced market capitalization conditions and can apply for a secondary listing in Hong Kong in the future.

Valuation increase dividend period

Judging from the overall performance over the past year, the return to the Hong Kong stock market has not only provided a "safety cushion" for US-listed stocks, but also promoted the market capitalization and liquidity of US-listed stocks. "dual listing can better avoid or correct the impact of short-term market sentiment on the market capitalization of the company. An investment banker of a leading brokerage said.

Although the company's shares in US stocks and Hong Kong stocks are convertible, there is basically no price difference between Chinese stocks in the two capital markets after the handover, but the boost effect of the return news on the share prices of Chinese stocks is still obvious. For example, on February 23, when the "timetable for the return of Hong Kong stocks was rumored", Trip.com 's pre-market gains widened to 15 per cent.

The trading activity of some Chinese-listed stocks in the Hong Kong stock market has exceeded that of the US stock market. In response, China International Capital Corporation estimated a set of data: JD.com 's average daily turnover rate in the Hong Kong stock market was 1.5% in February, slightly higher than the 1.3% in the US stock market. BABA's turnover rate of Hong Kong stocks from June to September 2020 is also higher than that of the US stock market. In addition, BABA's share of Hong Kong stock turnover in its overall turnover (Hong Kong stocks + US stocks) rose from 16.3% in July 2020 to 18.3% on March 31, 2021.

American investors may not know much about the products and markets of Chinese companies, so the valuation of the company may be affected to a certain extent. In China International Capital Corporation's view, the deeper significance of the return of US-listed stocks is to let Chinese companies return to their familiar environment and let their long-term users further become investors.

Although these companies have not yet been included in the Hong Kong Stock Connect, and southbound funds have not been able to share the feast of the return of Chinese-listed stocks, there has been a continuous discussion on the inclusion of secondary listed companies in the Hong Kong Stock Connect since the Hong Kong Stock Exchange allowed the secondary listing of Chinese-listed stocks. "the inclusion of the Hong Kong Stock Connect will inject new impetus into the secondary listed companies" has become a market consensus.

Data show that at present, southbound capital turnover has accounted for about 25% of the overall turnover of Hong Kong stocks, and increasingly holds the pricing power of some of the targets.

China International Capital Corporation believes that mainland investors themselves prefer the new economy sector and have a higher investment demand for technology and consumer leaders. At present, the secondary listed Chinese stocks have not been included in the Hong Kong Stock Connect, and the investment channels for mainland investors are relatively limited. If the secondary listed Chinese stocks are included in the Hong Kong Stock Connect in the future, the trading activity is expected to further improve.

According to an analysis by senior investors in Chinese stocks, in the future, the valuation of Chinese stocks will be decided jointly by investors in Hong Kong stocks and US stocks in the light of the enterprise's own business situation and the strategic policy of future development. It is believed that the funds and investors pouring into the Hong Kong stock market will give Chinese stocks a better valuation support.

For a long time in the past, due to the relatively loose listing conditions, relatively short cycle and relatively high financing efficiency, even in the face of foreign capital markets, new economy enterprises still choose to cross the sea and land in the US stock market.

It's a long way home. Now, these Chinese stocks that shine in the new economy have a historical opportunity to return to their home market and face investors who are more familiar with their business models. However, the return has only opened up a new world for Chinese stocks, and how to make full use of the Hong Kong stock market to achieve a jump in comprehensive strength and scale remains to be explored.