Southeast Asian companies seeking to broaden their investor base are increasingly looking to list on offshore exchanges – and global financial hub Hong Kong ticks all the boxes in terms of their needs.
The city is named as an ideal overseas listing destination for Association of Southeast Asian Nations (ASEAN) companies in a research report prepared by the Hong Kong Trade Development Council (HKTDC) in collaboration with CCB International (CCBI).
HKTDC Director of Research Irina Fan said: “With the Regional Comprehensive Economic Partnership (RCEP) free trade agreement coming into effect on 1 January 2022, closer regional economic integration will foster funding needs for projects across Asia, particularly with regard to ASEAN companies’ projects in Mainland China and vice versa. Hong Kong is ideally positioned to serve as a platform to satisfy two-way funding needs.”
Simon Lee, Head of Corporate Finance & Capital Market Services at CCBI, said: “This is a highly informative and well-researched paper for any executive of an ASEAN company seriously considering fundraising via an overseas listing, and in which the insights of many stakeholders in the region are shared. Hong Kong stands out as the top choice for the listing of ASEAN companies seeking overseas funding.”
There are already more than 80 ASEAN-headquartered companies listed on the Hong Kong Stock Exchange – the highest tally for a non-ASEAN stock market. These companies represent a variety of sectors covering consumer discretionary, property and construction, information technology and industrial businesses, with a total market capitalisation at US$15.3 billion. This shows Hong Kong is the most popular overseas listing destination for ASEAN companies, representing a wide variety of enterprises in terms of sector and size.
A range of factors draw ASEAN firms – including good market breadth and depth, efficiency and flexibility in funding overseas investment, access to more diversified financial and strategic investor pools, Hong Kong’s position as a doorstep to expansion in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) and Mainland China, strong governance, and the convenience provided by it being in a similar time zone to ASEAN countries.
Ms Fan highlighted key recommendations from survey interviewees, saying that Hong Kong should step up its promotion in ASEAN countries to raise companies’ awareness. “Indeed, it is clear that some ASEAN companies need to be more informed about the latest developments relating to Hong Kong’s listing regime and policies,” she said.
Survey interviewees highlighted that in addition to prevailing sectors in ASEAN such as consumer goods and services, mining and commodities and real estate investment trusts (REITs), fast-growing sectors including biotech, high-tech enterprises and fintech show good potential, while environmental, social and governance (ESG) is becoming an increasingly important factor across Southeast Asia.
Interviewees suggest Hong Kong can further reinforce its position as a listing destination for both prevailing and emerging sectors in ASEAN by streamlining its processes for overseas listing and the new special-purpose acquisition company (SPAC) regime, in addition to providing listing incentives for REITs. Hong Kong is also in a strong position to respond to the growing need for ESG funding in the ASEAN bloc.
Hong Kong can also enhance collaboration with ASEAN exchanges to promote dual primary/secondary listing in the city. “Hong Kong is the gateway between ASEAN countries and Mainland China. By working with ASEAN stock exchanges to facilitate the dual or secondary listing of ASEAN companies in Hong Kong, all parties would be better positioned to capture the growing opportunities,” Ms Fan added.
The report also gave insights into overseas listings by Malaysian enterprises. The Hong Kong Stock Exchange has the largest number of listed Malaysian companies among key stock exchanges outside ASEAN, and Hong Kong is well perceived by Malaysian companies as an important gateway for expanding into Mainland China.
Leveraging Malaysia’s economic growth and further economic integration in the region, Malaysia’s fast-growing information technology sector and growth companies could be potential candidates for listing on the Hong Kong Stock Exchange through the SPAC route.
The report is based on desktop research and interviews conducted by the HKTDC from September 2021 to January 2022. Interviewees included senior executives/members of listed companies, chambers of commerce, professional organisations, legal practitioners, accountants and investment bankers. Interviewees were asked to share their insights on Hong Kong’s strengths as a listing destination for ASEAN companies, some of the hurdles ASEAN companies are facing, as well as recommendations to strengthen Hong Kong’s position as a listing hub.
The first research report in this series focuses on the overall overseas listing regime of Hong Kong as well as Hong Kong as a listing destination for Malaysian companies, while two subsequent reports on Thai and Indonesian companies listing in Hong Kong will be released later this year.