Despite potential competition from the mainland, some are less worried about Hong Kong’s prospects due to the different characteristics of markets there and on the mainland. Hong Kong is recognized as a place to raise money from international sources, whereas domestic retail investors feature more heavily in mainland markets.
Given that stark difference, it’s unlikely that Hong Kong will lose out on business to the mainland markets, said Eddie Wong, capital markets services partner at PwC Hong Kong. Instead, he said, the new rules are expected to make capital markets in Hong Kong and on the mainland more complementary.
Wong said “many, many more” companies were expected to apply under Hong Kong’s new listing rules in the months ahead. He added that the second half of the year has typically seen more activity when it came to companies listing in the territory.
Specifically, there are now at least five large companies in the process of preparing IPOs in Hong Kong, Wong told CNBC. At least two of those companies were estimated to raise funds of around 100 billion Hong Kong dollars ($12.7 billion) between them, he said.
But the advantage of international exposure that Hong Kong currently enjoys could diminish down the road, said Kevin Leung, executive director of investment strategy at Haitong International Securities.
That’s especially the case given how MSCI’s inclusion of China A shares, which begins in phases starting on June 1, is set to increase inflows into Chinese securities.
Still, analysts are predicting it would take some time before Hong Kong feels any negative impact from the CDR program. Everbright’s Wen, for one, said it could be five to 10 years before the situation changes.
“Chinese tech giants will surely support the CDR, at least on the surface. But to them, listing in Hong Kong (or the U.S.) will be their key interest,” DBS Group Research analysts Ivan Li and Chris Gao said in a note, citing the depth of those markets and fundraising freedom as differentiation.
“This advantage may not last forever for sure,” the analysts said.
