In the News: ChiNext Reforms; Hong Kong Listings; and AmEx Approval
June 15, 2020 | BY
Vincent ChowChiNext finalizes reforms liberalizing listing process while tightening disclosure requirements; Hong Kong sees major secondary listings in quick succession with Nasdaq-listed NetEase and JD.com; and American Express becomes first foreign player approved to offer card-clearing services in China
ChiNext commences new registration-based IPO system
China's ChiNext board has launched its new registration-based initial public offering (IPO) system. On June 12, the China Securities Regulatory Commission (CSRC) and Shenzhen Stock Exchange (SZSE) published final rules for a trial of the new system with immediate effect. Pre-profit startups will be allowed to list on the Shenzhen tech board for the first time, but only in a year's time.
Under the new system, companies will no longer have to seek CSRC approval before listing on the board. However, they will have to comply with tightened information disclosure rules, similar to the system in place for the STAR board in Shanghai, which introduced the first registration-based system in mainland China last year. Companies with dual-class share structures, or weighted voting rights, will be allowed to list there for the first time.
The SZSE published eight general documents outlining the new rules along with 18 supporting documents, covering all aspects of the new system from initial audits to listing requirements to delisting rules. The reforms are designed to make the board more market-based and efficient. A key area in which the CSRC and SZSE are reducing their own roles in and affording more power to market forces is the pricing of stocks. Under the new rules, there will be no limits on the first five days of trading, after which there will be a 20% limit, compared with 10% previously. The new rules were first proposed on April 27.
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JD.com, NetEase raise billions in Hong Kong secondary listings
Chinese online retail giant JD.com is expected to raise around $4 billion in its secondary listing in Hong Kong, according to various media reports. The Hong Kong debut of the Nasdaq-listed company is set to be the second-biggest listing in the world in 2020. According to Bloomberg, the company priced 133 million new shares at around $29.16 each. The shares will see its first trading day on June 18.
JD.com's stock sale will come a week after another Nasdaq-listed Chinese company, China's second biggest gaming company NetEase, raised close to $3 billion in its secondary listing in Hong Kong on June 11. The company's shares were 360 times oversubscribed prior to trading. Last November, Chinese e-commerce giant Alibaba raised $13 billion in a secondary listing in Hong Kong, the first of its kind in the regional financial hub.
The quick succession of major U.S.-listed Chinese companies having secondary listings in Hong Kong, "coming home" as some have described it, is the direct result of the Hong Kong Stock Exchange undertaking its biggest listing reforms in several decades in April 2018. The exchange began allowing companies with weighted voting rights as well as those already listed elsewhere to list in Hong Kong, culminating in Alibaba's mega-debut in the city last November. In May, Hong Kong's benchmark Hang Seng Index unveiled plans to include companies with weighted voting rights and secondary listings for the first time.
More from CLP:
Trailblazing sale: In the News: Alibaba Raises $13 Billion
Annual review: The War for Capital – China's Stock Market Reforms in 2019
American Express secures China clearing license
American Express (AmEx) has been approved to start offering card clearing services in China, the first foreign payments company to be allowed to do so. On June 13, China's central bank announced that it had granted a clearing license to Express (Hangzhou) Technology Services Co., AmEx's China joint-venture (JV) with LianLian, a local fintech firm.
AmEx secured initial approval to begin preparations for its card clearing operations with its JV partner in 2018. In January, its application for an operating license was accepted by the central bank but not approved. Now that final approval has been given, AmEx must begin providing clearing services within six months, according to the central bank's statement.
Opening up China's domestic payments market to foreign players was a key point of contention during negotiations for the phase one trade deal between the U.S. and China. As part of the deal signed in January, China committed to accelerating its opening up of the market and promised to take no longer than 90 days to consider license applications from major U.S. card payment companies such as Mastercard, Visa and AmEx, all of whom were explicitly mentioned in the agreement. Soon after, in February, Mastercard secured initial approval to set up a card clearing business in China. However, Visa's application remains stalled despite being the first foreign player to lodge an application in 2017.
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