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Strong demand for Chinese stocks

Despite the fear of trade tensions heating up between the US and China, the US ECM market continues to show strong appetite for Chinese IPOs. So far this year, Chinese IPOs in the US have raised a total of $5.9bn via 17 deals, which is already the second highest full-year level in the last decade—behind 2014 when Alibaba priced the world’s largest IPO on record for $25.0bn.

Pinduoduo priced a $1.6bn IPO on July 25, 2018, which is the biggest Chinese IPO so far in H2 2018. Demand hasn’t been confined to the IPO market either—follow-on shares of Chinese companies are also setting new records. US-listed Chinese follow-on volume has reached $2.9bn via 9 deals in 2018 YTD, already the highest full-year level in the last 10 years. The biggest US-listed Chinese follow-on this YTD was Alibaba’s $1.1bn bought deal in May.



Competition heats up to lure Chinese tech firms

The technology sector has been the most active on US stock exchanges this year, with a total of 15 ECM transactions raising $5.4bn, followed by 6 deals from the school/university sector worth $772m. While the US continues to enjoy Chinese tech firm listings, there has been a concerted effort from Asian stock exchanges to keep Chinese technology companies listing locally. So far this year, all 7 Chinese tech firm IPOs* on US exchanges had dual-class structures.

Xiaomi became the first dual-class listed IPO on the Hong Kong Stock Exchange earlier this month, although the dual-class rules are undergoing further review. The Singapore Stock Exchange also approved dual-class listings in June 2018, though no Chinese tech firms have listed in Singapore in the past decade. The implementation of the new rules better positions both exchanges to attract Chinese tech firms from the US. Additionally, China has launched Chinese Depositary Receipts (CDRs) which would allow off-shore listed tech firms to offer shares on Chinese exchanges— if successful, tech companies listed in the US like Alibaba and Baidu could commence offerings in China.

*IPOs with a deal value above $20m

– Written by Andy Ye
Data source: Dealogic, as of July 30, 2018

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