Hong Kong Exchanges and Clearing Limited’s Senior Vice President Han Yingjiao Mainland technology companies should consider Hong Kong as the best platform for listing capital

HKEX's SVP Han Yingjiao suggests Mainland tech firms should consider Hong Kong for capital listing

On April 26th, ICBC International and ICBC Guangdong Branch successfully co-hosted the “2023 ICBC Guangdong-Hong Kong Enterprise Financial Forum and Hong Kong Listing Promotion Conference” in Nansha, Guangzhou, with the theme of “Yue-Hong Tongxin and Innovative Win-Win”. Nearly 150 representatives from the Hong Kong Stock Exchange, Nansha District of Guangzhou, technology enterprises, and the event organizers gathered together to explore the connectivity and interaction of the Greater Bay Area in the financial field, and promote the win-win development of high-quality mainland enterprises and the Hong Kong capital market.

2023 Guangdong-Hong Kong-Macao Greater Bay Area Innovation Economic Summit Forum Summer Forum

On May 25th, the “2023 Guangdong-Hong Kong-Macao Greater Bay Area Innovation Economic Summit Forum Summer Forum” hosted by Southern Finance Media Group and co-organized by Hang Seng Bank, and undertaken by 21st Century Business Herald and Guangdong-Hong Kong-Macao Greater Bay Area Research Institute was held in Shenzhen.

Han Yingjiao, Senior Vice President of the Hong Kong Stock Exchange and Director of the China Division’s Listing and Issuance Services Department, said in her speech, “Southbound funds have become an irresistible force in the Hong Kong capital market.” According to statistics, Southbound funds currently account for about 15% of the daily trading volume in the Hong Kong market.

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Hong Kong Stock Exchange opens dual-currency counter model for HKD and RMB

As Hong Kong and the mainland resumed clearance this year, the Hong Kong Stock Exchange will soon launch a remarkable policy. The Hong Kong Stock Exchange will officially open the dual-currency counter model for HKD and RMB on June 19th. At that time, investors can buy stocks of companies listed on the Hong Kong Stock Exchange in RMB in Hong Kong. “This is a very important step in the internationalization of the RMB, and will further consolidate Hong Kong’s position as the world’s largest offshore RMB center,” said Han Yingjiao.

From the current application situation of the company, Han Yingjiao revealed that 24 companies have submitted applications to the Hong Kong Stock Exchange to open RMB counter and made announcements. The industries include TMT, consumption, finance, etc., which are all stocks that are very popular among investors in the Hong Kong stock market.

At the same time, Han Yingjiao stated that in order to make RMB counter trading more active, the Hong Kong Stock Exchange will introduce a dual counter party mechanism. The Hong Kong government has exempted market makers from stamp duty on RMB counter trading through legislative procedures, hoping to enhance the liquidity of the RMB counter and narrow the price difference between the two counters.

The Hong Kong Stock Exchange has opened up new listing rules

It is worth mentioning that the Hong Kong Stock Exchange has been actively promoting innovation for the past decade.

Since the opening of the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect with the Shanghai Stock Exchange and Shenzhen Stock Exchange in 2014 and 2016, the proportion of Hong Kong Stock Exchange’s Hong Kong stock investment has steadily increased. Now, Hong Kong stock investment has become an important part of the daily trading proportion in Hong Kong, occupying about 15% of the market share.

In order to attract more new economy companies to enter the Hong Kong market, since 2018, the Hong Kong Stock Exchange has added three new chapters in addition to the original listing rules. These new chapters allow revenue-less biotech companies, innovative industry companies with different rights and structures, and Chinese concept stocks listed overseas to conduct secondary listings. This has successfully attracted a large number of new companies to settle in the Hong Kong market.

In 2022, the Hong Kong Stock Exchange once again launched the Hong Kong version of the SPAC listing system to further expand its market share. This year, in order to better serve specific technological industries, it launched listing rules for specific professional technology companies under the so-called 18C conditions, which effectively improved Hong Kong’s status as a global financial center.

In the continuous advancement, the Hong Kong Stock Exchange has made significant achievements in its development. According to Han Yingjiao, “In the past 14 years, Hong Kong has been the global IPO champion for 7 years, which fully demonstrates the strong attractiveness and competitiveness of the Hong Kong market.” At the same time, if the total amount of funds raised by Hong Kong’s IPOs in the past 14 years is added up, it has reached an amazing figure of approximately 445 billion US dollars, ranking first among major exchanges worldwide. This is enough to prove that Hong Kong’s position as the preferred overseas listing destination for mainland companies is stable and still advancing.

What are the advantages and benefits of mainland Chinese companies listing in Hong Kong? There are ten reasons:

The first point is that Hong Kong is a truly international market. Companies listing in Hong Kong can have access to top international investment institutions, which is conducive to improving corporate shareholder structure and corporate governance.

The second point is that Hong Kong is the most closely connected overseas market to China. Hong Kong investors have a deep understanding of mainland companies, which enables the investment value of the company to be fully released.

The third point is that the Hong Kong market can accommodate super large IPO listings. The capital in the Hong Kong market is freely flowing, which can attract global liquidity to support Hong Kong stock IPOs at any time.

The fourth point is that the issuance structure is rich. Mainland companies listing in Hong Kong can choose either H shares or red chips, or they can be spun off for listing.

The fifth point is that a large number of new economy companies have chosen to list in Hong Kong in the past three years. In the future, Hong Kong will become the core platform for new economy companies to list and trade in the Asia-Pacific and even the world. Mainland innovative companies can easily find benchmark valuations, reducing the difficulty of IPO issuance.

Point 6: The Hong Kong refinancing and merger market is very efficient, and Hong Kong stocks can be used as a payment method for mergers and acquisitions to promote company growth.

Point 7: The Hong Kong listing rules have clear and concise requirements for the regulation of shareholder increases and decreases in listed companies, and are executed with caution and efficiency.

Point 8: In addition to issuing stocks, Hong Kong-listed companies can issue various types of stock-based derivatives. These derivative products help to attract long-term investors, support stock valuations, and enhance liquidity.

Point 9: Hong Kong has a natural valuation advantage in key industries, especially many mainland consumer companies that have achieved very good valuation levels in Hong Kong and have been sought after by the market in the IPO subscription stage. There have been many similar cases this year.

Finally, point 10 is the deep connection of the Shanghai-Hong Kong Stock Connect, which will bring broad support of mainland funds to Hong Kong and is a source of power for the continuous development and breakthrough of the Hong Kong market.

Generally, when Chinese companies go public in Hong Kong or expand their business, they can choose to register a Hong Kong company.

Advantages of registering a Hong Kong company:

1. Hong Kong companies have no industry restrictions. They can operate any legal business without applying for additional licenses;

2. Hong Kong is the freest trading port in the world. Logistics are free to enter and exit, and general goods are not subject to customs duties. Hong Kong funds are free to enter and exit, and various foreign currencies can be exchanged and mobilized at any time;

3. Hong Kong company policies and tax rates: Hong Kong has few tax types and low tax rates. The main tax types for Hong Kong companies are three: one is profit tax (equivalent to mainland corporate income tax), with a tax rate of 16.5%; the second is salary tax (equivalent to mainland personal income tax), and the minimum tax-free amount per person per year is HKD 120,000; the third is property tax, with a tax rate of 15%, which is only required to be paid for properties rented out in Hong Kong. Special consumer goods (such as tobacco and alcohol) are subject to customs duties, while most other products are not subject to customs duties.

4. Utilize Hong Kong’s popularity to establish a Hong Kong brand and enhance the company’s international image;

5. Allow the existence of shell companies and offshore business operations;

Now, with the necessary materials ready, you can apply to register a Hong Kong company.

1. Determine the name of the Hong Kong company to be registered.

The restrictions on the names of Hong Kong companies are relatively few. Generally speaking, the names of Hong Kong companies are relatively free and can include “international, group, academy, association,” etc. They can also include place names. However, it is required that the name of the registered Hong Kong company must have an English name and end with the word “LIMITED”; it is also allowed to have a Chinese name, ending with “”.

2. Determine the scope of business of the Hong Kong company.

The scope of business of a Hong Kong company is not limited, as long as it is within the scope permitted by Hong Kong laws and regulations. Also, there is no foreign exchange control in Hong Kong, and capital flows freely.

3. Establish a sound company structure.

There must be at least one shareholder and director, and the shareholder and director can be the same person. There must be one company secretary.

4. Prepare the materials needed to register the company.

(1) Provide the company name;

(2) Provide the identification documents of the shareholders and directors;

(3) Determine the registered capital of the company;

(4) Determine the percentage of shareholding of the company’s shareholders.

5. Entrust a secretarial company.

The secretarial company is entrusted to act as an agent and a deposit is required to be paid. The relevant documents are signed to produce the materials, which are then submitted to the Hong Kong government for approval.

6. Government approval, Hong Kong company registration is completed.

After registration, the following materials can be obtained: company registration certificate, business registration certificate, company articles of association, company seal, meeting records, and so on. If the company operates officially in Hong Kong, it needs to open a bank account in Hong Kong.

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