Looking forward to 2025

The wind of "A+H" dual listing is blowing to all walks of life.

On January 13, Haitian Flavor (603288. SH) officially submitted its IPO application materials to the Hong Kong Stock Exchange, planning to list in both "A+H" places.

In addition to Haitian Flavor, A-share companies in various industries such as pharmaceuticals and new energy are also planning to go public in Hong Kong.

Although it is only 15 days before the start of 2025, including Haitian Flavor, there are already Hengrui Pharmaceutical (600276. SH), Mabwell-U (688062.SH) and other three A-share head companies have submitted their statements to the Hong Kong Stock Exchange.

According to incomplete statistics from Tradewind (ID: TradeWind01), no less than 16 A-share companies are planning to promote the listing of Hong Kong stocks since the second half of 2024.

Among them, CATL (300750. SZ) is the most eye-catching, with market news expecting its fundraising to reach US$5 billion, which could be an important support for the HKEX's IPO fundraising in 2025.

Affected by various factors such as the external economic environment, the IPO market of the Hong Kong Stock Exchange has been slightly deserted since 2023.

In 2023 and 2024, the IPO financing amount of the Hong Kong Stock Exchange will be HK $46.3 billion and HK $87.5 billion respectively, which has basically returned to the level of more than 10 years ago.

However, with the increasing enthusiasm of A-share companies to go to the Hong Kong Stock Exchange, it may promote the improvement of the position of Hong Kong stock market financing in the global market.

The market value of 100 billion yuan is "all the way to Hong Kong".

The "A+H" dual-listing model is heating up.

Wind data shows that Midea Group (000333. SZ), Lopal Technology (603906. SH), S.F. Holding (002352. SZ) has successfully landed on the Hong Kong Stock Exchange.

The market capitalization of most companies is already in the order of 100 billion.

As of the close of trading on January 14, the market value of Midea Group and SF Holdings' A-shares reached 567.8 billion yuan and 201.9 billion yuan respectively.

The

arrival of A-share large-capitalization companies has significantly boosted the IPO proceeds of the Hong Kong Stock Exchange. Wind data shows that in 2024, the IPO of the Hong Kong Stock Exchange will raise as much as HK $87.478 billion, a year-on-year increase of more than 8%, ranking fifth in the world.

Among them, only the two A-share companies of Midea Group and SF Holdings raised HK$35.667 billion and HK$5.831 billion respectively, accounting for nearly 5% of the IPO fundraising scale of the Hong Kong Stock Exchange in the whole year.

In order to attract A-share companies to list on the Hong Kong Stock Exchange, the policy side is also continuing to make efforts.

On 19 December 2024, the Hong Kong Stock Exchange (HKEX) issued a proposal to enhance the pricing and open market requirements for IPOs, proposing to lower the minimum threshold for listing H-shares in Hong Kong from at least 15% to 10% for the class of H-shares, or a minimum market capitalization of HK$3 billion for listed companies in Hong Kong.

This has further reduced the fundraising pressure for A-share companies to list in Hong Kong.

According to Tradewind (ID: TradeWind01), it has learned from people close to the Hong Kong Stock Exchange that some large-capitalization companies can apply for exemptions from the Hong Kong Stock Exchange to further reduce the proportion of H-shares issued.

According to the person, Midea Group and SF Holdings both reduced the proportion of H shares issued to 7.49% and 3.41% through the exemption procedure.

SF Holding is also the first A-share company to reduce the proportion of H-shares issued to more than 5%.

An investment banker in Beijing told Tradewind (ID: TradeWind01) that it is expected that more A-share companies with an H-share issuance ratio of less than 5% may be listed in Hong Kong in the future.

Looking ahead to 2025, A-share companies may still be the main force in IPO fundraising on the Hong Kong Stock Exchange.

According to the statistics of the projects disclosed by the Hong Kong Stock Exchange (ID: TradeWind01), excluding the A-share companies that have been successfully listed in Hong Kong, a total of 7 A-share companies have submitted statements from June 2024 to January 14, 2025, namely Haitian Flavor, Hengrui Pharmaceutical, Mabwell, Chifeng Gold (600988. SH), Jihong shares (002803. SZ), Junda Co., Ltd. (002865. SZ), Baili Tianheng (688506. SH）。

As of the close of trading on January 14, the market value of Haitian Flavor Industry and Hengrui Pharmaceutical has reached 239 billion yuan and 282.5 billion yuan respectively.

Not only that, according to incomplete statistics from Tradewind (ID: TradeWind01), there are also Tianyue Advanced (688234. SH), CATL, Fengyi Technology (688279. SH) and other A-share companies in total announced that they are planning an IPO on the Hong Kong Stock Exchange.

Among them, there are many companies like CATL that have a market value of more than one trillion yuan.

According to Bloomberg, CATL's Hong Kong IPO may raise US$5 billion, which will be completed in the first half of 2025 at the earliest, which is expected to further support the scale of Hong Kong IPO fundraising this year.

The sword pointed to the sea target

Judging from the listing of A-share companies in Hong Kong, the purpose of some companies is to alleviate the pressure on capital turnover.

This may be related to the regulator's cautious attitude towards refinancing.

On August 27, 2023, the China Securities Regulatory Commission (CSRC) issued a number of announcements on the active capital capital market, which pointed out that "we should highlight the support for the good and limit the inferior, and appropriately limit the financing interval and financing scale of listed companies with broken issuance, broken net, continuous loss in operating performance, and high proportion of financial investment." ”

After the "827 New Deal" of the China Securities Regulatory Commission, the scale of A-share refinancing has declined significantly.

Wind data shows that in 2024, the amount of A-share refinancing (including additional issuance, allotment, preferred shares and convertible bonds) will be 223.12 billion yuan, a year-on-year decrease of more than 7 percent, and the number of projects in the same period will only be 197, a decrease of more than 5 percent from 2023.

The regulator's review of the refinancing of some loss-making projects is not efficient. Taking Dizhe Pharmaceutical-U (688192.SH) as an example, it has taken nearly 20 months from the submission of the application in April 2023 to the meeting in December 2024.

During this period, Dizhe Pharmaceutical also took the initiative to reduce the amount of funds to be raised from 2.6 billion yuan to 1.8 billion yuan.

Or under heavy pressure, some companies choose to sprint to the Hong Kong stock market.

This is the case with Mabwell.

As an innovative pharmaceutical company, Mabwell owns three listed drugs: Humira analogue "Junmaikang", Prolixia similar "Mailishu", and denosumab XGEVA biosimilar "Maiweijian", and the target original drug is a sales market of 10 billion US dollars, but it has not yet achieved profitability - the revenue in the first three quarters of this year was 141 million yuan, the net loss was as high as 694 million yuan, and the cash and cash equivalents were 1.598 billion yuan in the same period.

As of the end of June this year, Mabwell's unused IPO raised funds of 815 million yuan.

As of the end of September 2024, Mabwell's current liabilities were RMB1.443 billion, nearly 2 times year-on-year, and the asset-liability ratio reached 57.64% in the same period, an increase of 23.12 percentage points over the same period last year.

However, for many large companies, the more important purpose is to supplement the "foreign exchange ammunition" to promote the globalization strategy.

Tradewind (ID: TradeWind01) noticed that many companies that plan to use the funds raised from Hong Kong stock IPOs for overseas layout do have relatively limited foreign currency reserves.

One of the purposes of the fundraising for the second listing of "Soy Sauce Mao" Haitian Flavor is to carry out global layout, including the establishment of overseas sales offices and supply chains, as well as the acquisition of overseas brands.

However, Haitian Flavor's foreign currency reserves are indeed limited. As of the end of June 2024, the amount of US dollars in the monetary item was 1.7462 million US dollars, equivalent to 12 million yuan.

This may bring some pressure to Haitian Flavor to expand overseas markets.

The

same is true for CATL, which had a foreign currency balance of US$6.735 billion and €3.858 billion respectively as of the end of June 2024.

However, foreign currency reserves still put some pressure on CATL's overseas factory construction.

For example, in December 2024, CATL and Stellantis, the world's fourth-largest automaker, jointly invested in a joint venture in Spain, with each party holding 50% of the shares, and built a joint venture battery plant in Zaragoza, Aragon, Spain, with an estimated total investment of up to 4.038 billion euros, while the first phase of the Hungarian plant is still under construction.

Hengrui Pharmaceutical, the "first brother of medicine", is also not "short of money", and as of the end of September 2024, cash and cash equivalents still reached 21.456 billion yuan.

However, foreign currency reserves are limited. As of the end of June 2024, foreign currency balances amounted to USD 291 million and EUR 135 million, respectively.

With the fierce competition in the domestic market, the overseas market is becoming more and more important for Hengrui Pharmaceutical.

In this IPO, one of Hengrui Pharmaceutical's plans is to cooperate in the acquisition of innovative drugs globally and promote the construction of overseas infrastructure.

The resurgence of the craze

Looking back at the past of A-share companies listing in Hong Kong, the financial industry was once the main force.

The last time A-share companies "ran wild" to the Hong Kong Stock Exchange occurred in 2015-2016, and brokerages were the main participants.

According to incomplete statistics from Tradewind (ID: TradeWind01), a total of 7 A-share companies were listed in Hong Kong in 2015 and 2016, and the number of brokerages reached 5.

The seven A-share companies are Dazhong Public (600635.SH) and China Merchants Securities (600999. SH), Everbright Securities (601788.SH), Orient Securities (600958.SH), Huatai Securities (601688.SH), GF Securities (000776.SH), and Fuyao Glass (600660.SH), with a total amount of 87.4 billion yuan.

However, at that time, the Hong Kong stock market had a strong financing capacity, and the total amount of IPO funds raised in 2015 and 2016 reached HK $261.3 billion and HK $194.8 billion respectively.

At that time, many A-share brokerages sprinted to Hong Kong stocks with a similar background and carried out a global layout.

A number of securities firms want to supplement their capital through "A+H" dual listings and build their visibility in the international market, so as to further develop cross-border business.

However, since 2019, the industries of A-share companies listed in Hong Kong have gradually diversified, involving pharmaceuticals, new energy, home appliances, etc.

Among them, CXO companies are the main component.

According to incomplete statistics from Tradewind (ID: tardeWind01), from 2019 to 2023, a total of no less than 11 A-share companies will be listed in Hong Kong, of which 5 companies are CXOs, accounting for nearly half, namely Kailaiying (002821. SZ), Zhaoyan New Drug (603127. SH), Tigermed (300347.SZ), Pharmaron (300759.SZ), Hepalink (002399.SZ).

Judging from the situation of A-share companies that have submitted statements and announced plans for Hong Kong stocks in the second half of 2024, the industry is distributed in the fields of new energy, medicine, semiconductor, food, etc., and the diversification characteristics are more obvious.

Judging from these three crazes, there are still differences in the background of the times.

In 2015, the IMF announced that the renminbi would be included in the SDR basket of currencies, further accelerating the internationalization of the renminbi. This has prompted brokerages as financial institutions to go overseas to meet the market's demand for global investment in RMB assets;

CXO's going overseas is also related to the financial background at the time. From the second half of 2019 to 2020, the Federal Reserve has cut interest rates through multiple rounds, which further reduced the financing costs of enterprises and promoted the vigorous development of innovative drug investment, which also brought more performance increments to CXO companies, prompting them to further expand production and strengthen overseas layout through financing.

However, behind the "A+H" boom, perhaps more is that the company's capital side is facing certain pressure on foreign exchange reserves, and the business side needs to enhance its international reputation and build its brand image through an international platform.

In 2025, as large A-share companies successively land on the Hong Kong stock market, the market is waiting to see whether it can help the IPO financing of the Hong Kong Stock Exchange to further rise.

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