HKEX extends lead over LSE as world’s third-most valuable bourse operator as US-China spat boosts Hong Kong listings
- The China-US dispute has driven up HKEX’s share price, firming up its lead over the London Stock Exchange in terms of market cap
- Hong Kong stands to benefit as more US-listed Chinese companies are set for secondary listings in the city
The escalation of tensions between China and the US has unexpectedly cemented Hong Kong Exchanges and Clearing’s place as the world’s third most valuable exchange operator, as it extends its lead over its London counterpart, in fourth place.
HKEX, which runs the Hong Kong stock exchange, has market capitalisation of US$47.1 billion after rising to a record on Tuesday, leading the London Stock Exchange (LSE) by the widest margin in more than two months, according to Bloomberg data. The LSE, capitalised at US$35.7 billion, is seen as a major competitor to Hong Kong after starting a cross-border investment channel with Shanghai and rejecting a takeover bid by HKEX last year.
HKEX’s shares have quickly bounced back from a March low, solidifying its position as the world’s third-largest publicly traded bourse, behind the CME Group and the Intercontinental Exchange in the US.
Deteriorating ties between Beijing and Washington are said by traders to be raising speculation that more Chinese companies trading in the US will return to Hong Kong for secondary listings, elevating the stock price. HKEX may also have benefited when it fended off competition from the rival Singapore Exchange last week to win a contract to offer derivative products linked to the underlying indexes compiled by MSCI to track stocks in Asia and emerging markets.
Shares of HKEX rose 1.8 per cent on Tuesday to HK$288 for a record close since its listing two decades ago when factoring in previous dividends. The stock has climbed 36 per cent from a March nadir, outpacing an 11 per cent gain on the Hang Seng Index in that period.
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“This shift in the core business, along with the launch of a broader product suite bodes well for development of a sustainable and diversified revenue stream,” said Harsh Wardhan Modi, an analyst at JPMorgan Chase in Singapore. “It is likely that in two to three years’ time, the Hang Seng Index will be dominated by new economy stocks.” The analyst sets a price target of HK$300 for HKEX.
In a move that will probably signal an influx of US-traded Chinese companies to the city, online e-commerce giant JD.com and gaming juggernaut NetEase have already applied to HKEX for secondary offerings, with trading likely to begin this month.
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Currently, there are 195 Chinese companies trading on the New York Stock Exchange and the Nasdaq, with a combined market values of US$1.1 trillion, according to Bloomberg data. Among the top five, only Alibaba Group Holding, which owns the South China Morning Post, has a secondary listing in Hong Kong.
HKEX is also moving to make it easier for high-growth Chinese tech companies to float shares in the city. The bourse last week began collecting public comments on a proposal that would allow the listings of a wider array of companies with a dual-class shares structure. Applicants that have corporate shareholders with weighted voting rights will probably be qualified for listings in the future, while the current rule limits the right to only founders and key staff.
HKEX’s market cap is four times that of Japan Exchange Group, the second-largest in Asia with a value of US$11.9 billion. Australian exchange operator ASX is ranked third, capitalising at US$11.7 billion.
