How to view the return of China concept shares to Hong Kong?

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Author: Ming Shuyuan official account: Ming shuzatan wechat id:laomingdashu

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According to media reports, on July 26, Alibaba Group announced that the board of directors had authorized the group’s management to submit an application to the stock exchange of Hong Kong to add Hong Kong as a major listing place.

In the context of the game between China and the United States, China concept stocks have been a hot topic in the past few years.

The so-called “zhonggai shares” are collectively referred to by overseas investors for all the stocks of Chinese companies listed overseas.

To some extent, overseas investors’ pricing of China concept shares actually reflects their expectations for the entire Chinese economy.

China concept shares have played an important role in the process of China’s reform and opening up.

The United States has long been the world’s largest economy, and New York is the world’s largest financial center. China concept shares are listed, mainly in New York.

The listing of China concept shares in New York has provided valuable funds for relevant Chinese enterprises. More importantly, by listing in New York, these enterprises have a deeper understanding of the rules of the international financial market, which is also conducive to improving the visibility of enterprises in the world, so as to attract more capital, technology and talents for the development of enterprises.

At the same time, many of the China concept stocks are China’s “star enterprises”, which have grown and expanded in the process of China’s reform and opening up. Relying on the vigorous development of China’s economy, they have also achieved good development. Overseas investors have strengthened their understanding of China and the Chinese economy through the concept shares, and also have the opportunity to participate in sharing the “super dividend” of the Chinese economy and the growth of Chinese enterprises.

It can be said that in the process of reform and opening up, the birth of China concept shares is a vivid portrayal of China and the world to achieve mutual benefit and win-win results.

However, in the past few years, due to the United States’ definition of China as the largest strategic competitor, and even a potential enemy, China US relations have undergone a “qualitative change”, entering a more volatile period, in which Chinese stocks have also been passively involved.

Some people in the United States manipulated the so-called “foreign company Accountability Act” and took some negative actions in the disclosure of information about China concept shares.

This problem has two levels: one is the technical level of supervision, and the other is the political level of the game between China and the United States. However, on the whole, the regulators of China and the United States are still maintaining close communication and active consultation. Some people in the United States will also make some harsh remarks, but this is more likely to be a negotiation strategy. In the long run, the problem will probably be properly solved.

China has always taken a positive position on the listing of enterprises in overseas markets such as the United States, as part of China’s deepening reform and opening up.

Alibaba, as a “giant” in China’s Internet industry, is also a heavyweight enterprise in China’s concept stocks. This time Alibaba announced that Hong Kong would be the main listing place, which has a certain positive significance for Alibaba itself, Hong Kong, China’s concept stocks, and even China’s economy.

For Alibaba, taking Hong Kong as its main listing place is a wish come true.

In fact, as early as 2014, when Alibaba planned to go public as a whole, the first place to consider was the Hong Kong Stock Exchange and carried out relevant roadshows. However, due to the restrictions of the Hong Kong Stock Exchange at that time, Alibaba finally switched to the New York Stock Exchange for listing.

In 2014, on the eve of listing in the United States, Alibaba publicly stated that it would return to the domestic capital market and share the company’s growth with domestic investors if conditions permit in the future.

In 2018, the Hong Kong Stock Exchange launched the listing system reform, which also created more favorable conditions for a large number of domestic Internet companies, including Alibaba, to list in Hong Kong.

In November 2019, Alibaba was listed in Hong Kong for the second time, and New York is still the main listing place of Alibaba.

Since its listing in Hong Kong in 2019, most of Alibaba’s outstanding shares have been transferred to Hong Kong for registration.

According to statistics, in the six months ended June 30, 2022, the average daily trading volume of Alibaba shares in the Hong Kong market was about $700million, and the average daily trading volume in the U.S. market was about $3.2 billion.

China and the Asia Pacific region are the main markets for Alibaba’s business, and Alibaba has always been highly concerned by Chinese and Asia Pacific funds. This time, Alibaba added Hong Kong as the main listing place, which is technically from Shuidao to qucheng, which is also in line with the expectations of the market over the past period of time.

From a practical perspective, Alibaba’s Dual Major listing can also better cope with the uncertainty of the single market, so as to better cope with the challenges brought by changes in the external environment.

For Hong Kong, “Big Mac” enterprises like Alibaba, taking Hong Kong as the main listing place in the world, will help consolidate and expand Hong Kong’s position as the world’s major financial center and “refuel” for Hong Kong’s future.

Hong Kong is a unique city in modern Chinese history.

After the founding of new China, due to the brutal geopolitical situation at that time, the United States and other western countries blocked and encircled China, and Hong Kong played a special role as a window for China to the world.

After Hong Kong’s economic take-off, it also encountered China’s reform and opening-up, and Hong Kong once became an important source of capital, technology and talents for China.

However, after the return of Hong Kong in 1997, China and the United States, Britain and other countries have launched a fierce competition, either overtly or covertly, for the future of Hong Kong.

In recent years, external forces once instigated a series of attempts to disrupt Hong Kong. However, with the implementation of the national security law of the port area in 2020, the reform of the new electoral system in 2021 and the election of the chief executive in 2022, the principles of “putting order out of chaos” and “patriots governing Hong Kong” have been firmly implemented in Hong Kong politics.

Hong Kong not only wants the return of sovereignty, but also the return of the people. This is the biggest change in Hong Kong at present. For the whole of China, this process is not only to return Hong Kong society to stability, but also to make Hong Kong economy more prosperous and Hong Kong people’s lives more happy, so as to reflect the strong vitality of Hong Kong, which adheres to the principles of “one country, two systems” and “patriots govern Hong Kong” after the return.

Hong Kong is a major financial center in Asia and the world.

Hong Kong implements the common law of the United States and the United States, and its legal, economic, fiscal and tax systems can be seamlessly connected with New York and London, which has a great attraction for international capital.

After 2018, the Hong Kong stock exchange continued to revise its listing rules, creating conditions for the return of high-quality China concept shares.

Alibaba, as a “Big Mac” enterprise with a market value of more than HK $2trillion, chose Hong Kong as its main listing place, reflecting the unique status and attraction of Hong Kong’s financial center; At the same time, Alibaba’s return to Hong Kong will also significantly improve the profitability, scientific research investment and other technical indicators of companies listed on the Hong Kong stock exchange.

For the Hong Kong stock exchange, more high-quality trading targets, including Alibaba, will also enhance its attractiveness to the global market. Alibaba, and even the China concept group represented by Alibaba, will achieve a win-win situation with the Hong Kong stock exchange.

According to the “global financial center index” (GFCI), Hong Kong is currently the third largest financial center in the world, ranking second only to New York and London, with great development potential.

Bloomberg data showed that benefiting from the gradual improvement of connectivity mechanisms such as Hong Kong stock connect, the average daily turnover of the Hong Kong stock market jumped to about $25billion in the 30 days ended February 16 this year, which has significantly surpassed the London Stock Exchange, equivalent to 60% of the New York Stock Exchange in the same period.

The return of zhonggai enterprises such as Alibaba to Hong Kong will further enhance Hong Kong’s status as a major financial center in the world, and allow investors in mainland China to share the growth dividends of zhonggai more conveniently through Hong Kong stock connect and other methods.

For zhonggai shares, there are certain uncertainties in their development in the United States.

China has been actively promoting the resolution of regulatory differences between China and the United States in order to provide a stable expectation for Chinese companies and global investors. As we mentioned earlier, it is still very possible for China and the United States to reach a regulatory consensus. However, it should be noted that China concept shares are indeed facing certain regulatory risks, which will inevitably affect the confidence and expectations of overseas investors.

In this case, Hong Kong has actually assumed another role, and it has become a “safe harbor” for China concept shares.

By returning to Hong Kong, China concept stocks listed in the United States can not only continue to enjoy the convenience of the international financial market, but also avoid the supervision and market risks in the Sino US game to a certain extent closer to the hinterland of China.

Finally, for China and its economy, Alibaba’s choice of Hong Kong as the world’s second major listing place outside New York also reflects Alibaba’s confidence in Hong Kong and even China’s economy.

At present, the world economy is facing three major challenges: first, the United States provokes competition with China’s major powers, causing a sharp rise in global geopolitical risks; Second, the conflict between Russia and Ukraine has triggered energy and food crises; Third, the United States has implemented irresponsible fiscal and monetary policies for a long time. At present, under the pressure of high inflation, the Federal Reserve’s aggressive interest rate hike and table contraction may lead to economic recession, financial turmoil and impact on the world economy.

China’s economy is closely linked to the world economy and cannot stay out of it. Moreover, China’s economy itself is also facing structural challenges, epidemics and other adverse factors.

But realistically speaking, when the global economy is facing many uncertain factors, China’s economy is still the most certain factor.

China’s economy faces many risks and challenges in the short term, but the fundamentals of its long-term improvement still exist; China’s domestic market has huge space and room for manoeuvre; In a turbulent world, China has insisted on deepening reform, expanding opening-up, and establishing mutually beneficial and win-win relations with all countries in the world, which has become the biggest positive factor in stabilizing and promoting world economic growth.

Alibaba, as the first generation Internet giant growing up in the process of China’s reform and opening up, is not only the beneficiary of China’s reform and opening up, but also a positive force to promote the digital transformation of China’s economy.

At present, the companies listed in Hong Kong are mainly mainland companies. In the past two years, mainland enterprises accounted for more than 98% of the IPO amount in Hong Kong, and mainland companies accounted for more than 70% of the constituent stocks of the Hang Seng Index in Hong Kong. Hong Kong stocks have been a barometer of the entire Chinese economy to some extent.

In this context, Alibaba added Hong Kong as the first listing place, casting a vote of confidence for the future of China’s economy.

The practice of China’s reform and opening up has proved that the more firmly optimistic about China and the future of China’s economy, the more “heavily positioned” enterprises in China, the more they can share the “super dividend” of China’s development.

On the contrary, those who repeatedly criticize China and concoct various versions of the “theory of China’s collapse” in different ways are constantly beaten in the face.

For Alibaba, it is also a constructive and wise choice to take New York and Hong Kong as the main listing places in the world.

Alibaba’s choice to return to Hong Kong does not mean that the company will abandon New York.

No matter for Alibaba or for all China concept shares, everyone hopes that China and the United States can establish a relationship of mutual respect, peaceful coexistence, mutual benefit and win-win results.

China and the United States will benefit both sides if they cooperate, and both sides will be hurt if they fight. China concept shares have a deep feeling about this.

The birth and development of China concept shares is a vivid portrayal of the mutually beneficial and win-win relationship between China and the United States.

It is expected that the United States will also work with China to make joint efforts to this end.

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