(Yicai Global) Jan. 10 -- Despite the HKD280 billion (USD35.7 billion) in funds raised through initial public offerings making Hong Kong the world's premier IPO market for the sixth time in 10 years last year, the bourse's boss doesn't see that as a key performance indicator.
The Hong Kong Stock Exchange is more concerned with improving the disclosure mechanism, Chief Executive Charles Li said yesterday at the J.P. Morgan Chase Healthcare Conference that runs in San Francisco from Jan. 7 to 10. The exchange will continue to develop and adjust relevant processes and rules, he added.
After much deliberation, the HKEX last year changed its listing rules to allow companies with weighted voting rights and as-yet unprofitable biotech companies to list, tempting more businesses to go public in Hong Kong. They included Beijing-based smartphone maker Xiaomi, which raised about USD4.7 billion in July when it became the first company with a weighted voting rights structure to list in the city.
The reform was the most significant to listing rules in the city in over 20 years and came five years after Alibaba Group, which also has a dual-class share structure, was snubbed. The e-commerce giant went on to become the world's biggest IPO -- USD25 billion -- when it debuted in New York.
Whether companies or funds enter a market depends ultimately on whether they need that market, and a stock exchange is only an adjunct, Li said, adding that the HKEX will further clarify relevant procedures and rules to set the entry system at a reasonable level and leave the choice up to investors and companies going public.
Chinese capital, which has a different logic from its US counterpart, may recognize small and mid-sized biotech companies that the American market overlooks, Li added. You do not have to sell a pill for USD500 to be accepted in Hong Kong, he said. You can sell it for USD50!
The HKEX has a higher stock turnover rate and better liquidity given Asian capital's greater proclivity for trading, he stated, and these characteristics may be the reason US biotech firms list in the special administrative region.
Li also discussed the opportunities the biotech sector offers to global investors and issuers, saying that family wealth in China has long been locked in real estate and mainland equity markets. Willingness to diversify asset allocation and seek higher returns will create a period when Chinese funds are relatively cheap, giving the issuer an advantage in pricing, he noted.
Companies listing in Hong Kong may price more aggressively. The Hong Kong bourse expects the market to develop more steadily, but investors need more time to mature, he explained.
Editor: Ben Armour