According to Reuters, a recent flurry of IPOs and secondary listings worth at least $4.5 billion due to launch in Hong Kong will put 2020 on track to be the second-busiest year for equity capital markets in the city. Against the backdrop of the turmoil created by the protests earlier in the year which ran straight into the Covid-19 pandemic whose effects on the region began to take hold around the Lunar New Year celebrations and continue to affect business locally and globally, this is yet another example of the resilience of Hong Kong as a business centre. It’s also fair to point out that major secondary listings are expected to continue in the short term in the wake of the ongoing US/China trade stand-off, during which various bills have been introduced Stateside which are proposed to subject Chinese companies to greater scrutiny over US listings which have in turn encouraged them to seek alternative placements.
As a result, and as we run up to the Mid-Autumn festival, a number of eye-catching Hong Kong deals have been announced in September alone. Sidley Austin advised Chinese fast-food giant Yum China Holdings on its $2.2 billion secondary listing on the mainboard of the Stock Exchange of Hong Kong, with Freshfields Bruckhaus Deringer and Simpson Thacher & Bartlett counselling the sole sponsor, underwriters, joint global coordinators and bookrunners.
Then Skadden, Arps, Slate, Meagher & Flom and Global Law Office Shanghai advised Chinese courier ZTO Express on its $1.55 billion secondary listing on the Hong Kong Stock Exchange, and again Freshfields Bruckhaus Deringer grabbed a key role advising the sponsor and the underwriters alongside Jun He.
Davis Polk & Wardwell and Zhong Lun Law Firm advised Chinese biopharmaceutical giant Zai Lab’s on its $761 million secondary listing on the mainboard of the Hong Kong Stock Exchange, with Simpson Thacher & Bartlett and Commerce & Finance Law Offices advising the underwriters.
And most recently Davis Polk & Wardwell advised Ming Yuan Cloud Group on its $797 million IPO on the Hong Kong Stock Exchange, with Freshfields Bruckhaus Deringer representing the joint sponsors and underwriters, and the Magic Circle firm further cemented its credentials advising the underwriters on the $783 million secondary listing in Hong Kong of Chinese hotel management company Huazhu Group alongside Jingtian & Gongcheng, with Cleary advising Huazhu Group.
While the US and China remain at loggerheads both stand to suffer, but it has provided and unexpected fillip to Hong Kong’s economy. With the US election in November and the prospect of a new administration taking the reins early in 2021 this could be a relatively short-lived surge but if 2020 has taught us anything, it’s to predict nothing with any degree of certainty. As the diminishing numbers of new cases in Hong Kong contribute to a cautious return to day-to-day normality with schools, bars and leisure facilities gradually reopening (notwithstanding the stiff restrictions on inbound travel), there remains the nagging question of “what’s next” for the city?
Contributor: Sam Kenworthy (Director – Head of Private Practice)