Trade friction fails to dent Chinese public offerings on US bourses

Trade friction between the world's two largest economies has not deterred Chinese companies from pursuing listings in the US capital markets owing to capital requirements and the necessity for United States investors to diversify investments.

Most of the US-listed Chinese companies are technology titans and much younger than some of their US peers. Most of these companies are in potential maturation stage for initial public offerings (IPO) and pursuing their next steps.

According to BNY Mellon, the New York-based custodian bank and asset servicing company, about 15 to 20 Chinese companies listed their shares on US bourses this year to raise $3 billion, compared to 20 companies that collected $7 billion to $9 billion in funding last year. The IPO pipeline outlook for 2020 looks robust, it said.

Although there were media reports in September that the US government is considering delisting Chinese stocks in the US and limiting US government pension funds' investments in Chinese companies, US bourses are still a favorite listing destination for Chinese technology companies.

"The US market has significant potential peers, seasoned investors and sheer size of assets under management. At the same time, US investors are seeking exposure to what is unique in Asia-Pacific－the demographics that you cannot replicate in other parts of the world," said Francis Giglio, head of Asia-Pacific Depository Receipts at BNY Mellon.

"Chinese companies listing in the US can have unparalleled access to knowledge capital in the US market, a market where investors are aware of the intrinsic value. Enterprises will continue to evaluate each market based on its unique characteristics to find the best fit for them," Giglio said.

For example, OneConnect Financial Technology Co－the online financial services platform of insurance giant Ping An Insurance Group Co of China－in December raised $312 billion after slashing its IPO target price by half.

Giglio reiterated that it is possible that some Chinese companies which have issued ADRs in the US could seek another listing on the Hong Kong stock exchange. "It is a viable option for companies based in Asia to access both the capital markets of the US and Hong Kong to fund their strategies."

In November, technology giant Alibaba Group's IPO in Hong Kong created a record for the largest IPO of this year by raising about $11.2 billion in a float that was larger than Uber Technologies Inc's $8.1 billion IPO in April, and about twice the size of Budweiser Brewing Company APAC's $5.76 billion deal in September.

The global e-commerce behemoth listed its shares in New York five years ago in the world's largest public offering, raising $25 billion in 2014 after the Hong Kong stock exchange refused Alibaba's IPO application since it did not allow dual class share sales at that time.

Chinese enterprises usually list their shares in the form of American Depositary Receipts (ADR) in US stock exchanges, representing a feasible and liquid way for US investors to invest in overseas companies. Foreign firms also benefit from issuing ADRs as they come without the hassle and expenses involved in listing on US bourses.

As at February this year, 156 Chinese companies were listed on US bourses and had a total market capitalization of $1.2 trillion, according to the US-China Economic and Security Review Commission.