The U.S. has considered delisting Chinese Stocks especially the IPOs from the stock market. Also, it is limiting its investments to China. This would mean a shift of capital flow to Hong Kong.
This could prove beneficial to the Hong Kong Capital Markets. The companies would naturally move to Hong Kong or the domestic market in Mainland China as reported by CNBC.
The restrictions would also mean reduced investments of government pension funds in the Chinese market.
If that comes to pass, it could affect not just the Chinese, but also U.S. markets, said EY’s Ringo Choi, Asia Pacific IPO leader.
“It would … hurt everyone,” he said. “But if they did do that, I think a lot of companies will come to Hong Kong, plus list in domestic markets like STAR board.” STAR meaning – the Science and Technology Innovation Board, which is China’s Nasdaq-style Technology Board(launched in July).
This report caused U.S. stocks and shares of Alibaba, Baidu and other Chinese companies to drop on the American market on Friday.
This would be great for the Hong Kong stock market. This is because before this report the market saw a drop in the IPO proceeds by 46.8% versus last year’s proceeds. Refinitiv’s data suggests that this has been the lowest since 2017.
Singapore’s DBS mentioned in a note that the Chinese firms have many options to list themselves, besides the U.S. market. The one likely option among all of them could be the Hong Kong market.
“Since Chinese stocks have several alternative listing options, ranging from London to Hong Kong to the ever-burgeoning on-shore market, losing access to the US would be negative but not devastating,” said strategists Philip Wee and Eugene Leow in the note.
The Chinese equity market would still get inflows from foreign entities as it’s stocks are a part of indices such as global index provider MSCI and the Bloomberg Barclays Global Aggregate Index.
Traditionally the Chinese firms have chosen the U.S. equity market to list itself because they tend to get a better valuation and also the investors are also comparatively more knowledgeable/mature.