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Going Public Overseas

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Going Public Overseas

How to Choose the Right Stock Exchange for Your Company

ZH Island,

5 min read
5 take-aways
Audio & text

What's inside?

Chinese companies need to consider specific factors when choosing a stock exchange for their IPOs. 

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8

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Recommendation

Chinese businesses made their debut on foreign stock exchanges in the 1990s – first, the state-owned enterprises and then Internet companies including Alibaba, Tencent, and Baidu. Now the Chinese businesses joining their ranks with initial public offerings (IPOs) are ”new economy” companies – innovative growth drivers emerging in the technology, transportation and consumer services sectors. The number of Chinese companies going public in the United States and in Hong Kong increased notably in 2017–2018. Following 74 IPOs in 2017, multiple high-profile IPOs as of August 2018 included iQiyi (China’s Netflix), video streaming platform Bilibili, smartphone maker Xiaomi Technologies,and online shopping platform Pinduoduo. Though many of these companies’ stocks have underperformed, Chinese companies continue to apply to list in Hong Kong and New York. In this article from finance media Zheng He Island, economist Guan Qingyou explains this trend and advises Chinese companies on how to choose between the Stock Exchange of Hong Kong, the New York Stock Exchange, and NASDAQ. getAbstract recommends Guan’s analysis to anyone who keeps an eye on capital markets.

Summary

In 2017, 50 Chinese companies went public in Hong Kong and 24 went public in the United States. This is the highest number of Chinese initial public offerings (IPOs) abroad since the Chinese economy slowed in 2011. Of the Chinese companies trading on foreign stock exchanges, around 80% are on the Stock Exchange of Hong Kong (HKEX), including big names such as Tencent, Mengniu Dairy, China Mobile and Geely. Alibaba trades on the New York Stock Exchange (NYSE), while Jingdong (JD.com) and Baidu trade on NASDAQ. In the past, Chinese companies have also opted for other foreign stock exchanges including London, Toronto and Singapore. Some stock exchanges have more stringent IPO requirements than others. They also operate under different market systems, are subject to various degrees of government control, attract different types of investors, and vary in the size of the capital market. 

An increasing number of Chinese companies prefer Hong Kong and US stock exchanges over domestic ones like the Shanghai Stock Exchange and the Shenzhen Stock Exchange. These domestic stock exchanges have long, tedious application processes...

About the Author

Guan Qingyou is the chief economist at the Reality Institute of Advanced Finance. He also serves as the vice president of Minsheng Securities. 

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