China may let Hong Kong-listed firms raise funds in Shenzhen via ‘H + A' IPOs
New Chinese government guidelines allowing Hong Kong-listed companies to seek secondary share listings in Shenzhen could help these companies expand on the mainland while potentially encouraging more Hong Kong share offerings, according to analysts.
Unveiled on Tuesday by the Central Committee of the Communist Party and the State Council, the guidelines allow mainland companies with Hong Kong-listed shares (known as H shares), to issue A shares, or yuan-denominated shares, on the Shenzhen Stock Exchange – a reversal of the so-called A + H pathway that mainland-listed companies can use to add dual listings on the
Hong Kong exchange
The guidelines did not elaborate on which companies would be eligible for H + A listings or the required procedures.
The new opportunity would diversify fundraising options for businesses within the
Greater Bay Area , the economic region including Hong Kong, Macau and nine cities in Guangdong province, said Wilson Chan Fung-cheung, adjunct professor at City University. It would 'allow businesses within the [bay area] to raise new funds to expand their operations in mainland China, where their brands are more widely recognised', he said.
The dual-listing scenario could also tempt more businesses to seek listings in Hong Kong, as a single application could allow them to offer shares in both markets, said Kenny Ng Lai-yin, a strategist at Everbright Securities International in Hong Kong.
The new regime could exclude some listed companies, including
Tencent Holdings , that use a structure that disallows mainland listings. Many Chinese companies listed in the US and Hong Kong use the set-up, known as the variable interest entity structure, to circumvent Chinese restrictions that prohibit foreign investors from holding assets in certain sectors such as the internet and telecommunications.
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