ATAHK reads from China Daily that Hong Kong's position as the world's top destination for new share listings is facing the stiffest challenge not from other global or regional financial centers, but from mainland enterprises which have become increasingly disillusioned by the persistently low ratings of their Hong Kong-listed H shares compared to Shanghai-listed A shares.
In some extreme cases, H shares are trading at up to 80-percent discounts to their equivalent Ashares. The disparity seems particularly irking to mainland property companies whose H sharesare trading at what managements believe to be substantially below asset values because of the vast difference in standards applied by Hong Kong-based institutional investors to their mainland counterparts.
Unsurprisingly, a growing number of Chinese enterprises, at least 10 by the latest count, have disclosed plans to either delist in the SAR, spin off assets and list them on the Chinese mainland, or sell a controlling stake to a mainland-listed or shell company, since late last year, according to a Reuters report. Prashant Bhayani, BNP Paribas Wealth Management's chiefinvestment officer, said mainland entrepreneurs "will be tempted to delist their companies from Hong Kong if the A/H premiums continue at these high levels".
Among them, the most notable is Wang Jianlin - the mainland's richest man - who had saidearlier he planned to delist his flagship real estate company, Dalian Wanda CommercialProperties Co Ltd, from Hong Kong. Since then, another major Hong Kong-listed mainlanddeveloper, Evergrande Real Estate, has said it's seeking a listing in Shenzhen through aninjection of assets into a smaller listed rival in which Ever grande had bought a controlling stake.
Many mainland enterprises had sought to list in Hong Kong with the view to tapping into the international capital market, where funding is more readily available at significantly lower costs than on the mainland. But, the slowdown in the mainland economy in recent months has prompted a re-evaluation of mainland risks, resulting in lower ratings for mainland assets,especially properties, by foreign investors.
Mainland entrepreneurs were also attracted to Hong Kong's capital market, which is dominatedby institutional investors from around the world. There is really nothing Hong Kong can, or should, do to keep those who believe that the attraction that drew them to Hong Kong has turned into a disadvantage.
Ultimately, the SAR's main attraction is its free market and it should keep it that way.
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