Returning firms on the horns of IPO dilemma

According to David Chin, China country head at UBS, a Swiss financial services giant, there are about 240 Chinese companies listed in the US at present. Their total market capitalization could be around HK$9.2 trillion ($1.44 trillion). Some 17 of these have already completed their secondary listing in Hong Kong, accounting for 69 percent of the HK$9.2 trillion mentioned earlier.

In this sense, the challenge facing US-listed Chinese companies has been addressed to a great extent. Meanwhile, there are another 50 companies that have not been listed in Hong Kong but meet the requirements to go public in the city, said Chin.

These companies account for another 30 percent of the HK$9.2 trillion market cap. They may choose to float on the Hong Kong bourse this year. If they do, that would mark the easiest and possibly the smoothest transition these companies could take, considering the US regulators' hardening stance, he said.

For the rest 170 US-listed Chinese companies, which account for less than 2 percent of the total market cap of their kind, they do not meet the listing rules in Hong Kong for the time being.

Chin said there are two possible ways out for such companies. They can either hope for the Hong Kong bourse loosening its listing policies this year or delist in the first place and restructure later so that only part of their business can be listed in Hong Kong or the STAR Market of the Shanghai bourse.

Felix Fei, EY assurance partner, said new economy companies in the TMT (technology, media, and telecom), biotechnology and healthcare sectors will likely be the main players seeking Hong Kong IPOs this year, in anticipation of the return of some US-listed Chinese companies. They will also become the driver of the Hong Kong's economy next year, he said.

In an interview with Reuters in late December, Gordon Tsang, partner of the Hong Kong-based Stevenson, Wong & Co law firm, said the third and fourth quarters of this year will witness the highest number of returns of US-listed Chinese companies to the Hong Kong stock exchange or the Chinese mainland's A-share market.

In a sense, the way has been paved already for the return of overseas-listed Chinese companies. Secondary listing regulations were revised in Hong Kong in November. The Stock Exchange of Hong Kong Ltd, a wholly owned subsidiary of Hong Kong Exchanges and Clearing Ltd－operator of the Hong Kong bourse－said in an announcement that non-innovative companies without a weighted voting rights structure will be allowed to have secondary listings in Hong Kong.