Chinese companies take record 50% of global equity raising in first half of 2020

HONG KONG: Firms in China brought in half of equity capital raised globally this year so far, setting a record that highlights the economy’s earlier revival from the COVID-19 pandemic, plus the degree to which soured U.S. relations are turning Chinese firms homeward.

China-based companies sold shares worth $32.1 billion in January-June including multi-billion-dollar secondary listings in Hong Kong, equivalent to 49.8% of worldwide offerings, showed data from Refinitiv. The total for U.S. firms was $15.8 billion.

“With massive liquidity injections by various governments (supporting virus-hit economies), I’m not surprised by the size of Chinese capital raised this year - and the trend may continue,” Li He, capital markets partner at Davis Polk, said of China firms taking advantage of their early lockdown emergence.

China was hit by the novel coronavirus in December and was the first country to impose virus-prevention lockdown measures on individual movement and business activity in late January. Markets began their return to normality in April.

Chinese fundraising has been helped by the popularity of Shanghai’s year-old growth-focused STAR Market, as well as well-received initial public offerings (IPOs) in Hong Kong and the massive secondary listings - including the $3.9 billion raised by e-tailer JD.com Inc 9618.HK this month and $3.1 billion by games developer NetEase Inc 9999.HK.

“For Chinese companies, both the Hong Kong and U.S. markets are getting back to normal,” said Houston Huang, head of global investment banking for China at JPMorgan. “Market activity (deal volume) is much better than anybody expected at the beginning of the year.”

Escalating Sino-U.S. geopolitical tension over issues such as trade is widely expected to prompt more U.S.-listed Chinese firms to conduct secondary listings closer to home where they can raise funds in markets absent of anti-Chinese sentiment.

Companies considering a secondary Hong Kong listing include Yum China Holdings Inc and ZTO Express (Cayman) Inc, said two people with direct knowledge of the matter.

Neither Yum nor ZTO responded to requests for comment outside of regular business hours.

Secondary deals are also increasing investor interest in Hong Kong, a market with a reputation for hosting stodgy financial and property groups rather than growth-focused tech companies.

Li Hang, CLSA head of Greater China equity capital markets, said the JD.com sale, on which his bank worked, was able to win orders not just locally but also from Southeast Asia and Europe.

“If a company is looking at a secondary listing in Hong Kong, they need to be looking at gathering investors’ interest from not only from Asia, but also Europe and the U.S.,” Li said.