HONG KONG — JD.com shares surged nearly 6% on their Hong Kong trading debut on Thursday after raising as much as $3.88 billion in the city’s largest listing this year, sending an encouraging signal for companies lining up to raise capital.
China’s second-largest online retailer’s shares were at 235.60 Hong Kong dollars ($30.40), up 4.1%, in midmorning trading, compared with the issue price of HK$226. The shares opened at HK$239, up 5.8%, and touched a low of HK$228.60. The Hang Seng Index was down about 0.3% on Thursday morning, as fears of rising coronavirus infections sapped investors’ risk appetite globally.
JD.com’s debut in Hong Kong comes a week after Chinese game developer NetEase jumped 5.7% in its own secondary listing in the city. NetEase shares were down 1.6% to HK$125.90 in morning trading on Thursday, but still above its listing price of HK$123.
The two technology companies followed Alibaba Group Holding in picking Hong Kong for their secondary listings.
JD.com’s opening could boost the hopes of companies that are queuing up either for an initial public offering or a secondary listing, like Nasdaq-listed JD.com, amid threats from Washington of being pushed out of American exchanges.
Search giant Baidu, which trades on the Nasdaq, is among U.S.-listed Chinese companies considering an offering in Hong Kong, while New York Stock Exchange-listed Yum China Holdings, which operates KFC, Pizza Hut and Taco Bell restaurants, has invited banks to pitch for lead manager roles for a possible secondary listing, people familiar said.
Three other mainland Chinese companies have begun assessing investor demand for IPOs in Hong Kong, including Zhenro Services Group, the property management unit of Zhenro Properties Group. E-cigarette device maker Smoore International Holdings is gauging investors’ demand, while Kangji Medical, a mainland provider of surgical instruments, is raising up to $404 million.
Meanwhile, China Bohai Bank will start premarketing its roughly $2 billion IPO in Hong Kong next week.
Chinese companies are tapping Hong Kong’s market after the U.S. Senate last month approved a bill — still pending in Congress — that could force mainland companies to delist if they fail to comply with U.S. regulatory standards for three consecutive years. Currently, foreign companies are subject to a lower standard of scrutiny.
“We think the standoff between the U.S. and Chinese regulatory authorities will force many Chinese companies to first think about a dual listing in Hong Kong or elsewhere, and wait to see how the final law will be written,” Citigroup said in an investor note.
About 42 Chinese companies trading on U.S. stock exchanges qualify for listing in Hong Kong. If they issue 5% of their outstanding shares in Hong Kong, it would amount to capital raising of $27 billion, UBS analysts said in an investors’ note.
A total of 354 companies of Chinese origin have listed in the U.S. since 1993, raising a total of $88.5 billion, according to Citigroup. Over the years, 107 of them have been delisted, and the current market value of the listed companies stands at $1.5 trillion.
Just this month, 58.com, often called the Craigslist of China, and BitAuto, an automobile information provider, both of which are listed on the NYSE, agreed on deals to go private.
So far this year seven Chinese-origin companies have delisted from U.S. exchanges, the most since 2016, according to data compiled by Dealogic.
JD.com’s secondary offering was multiple times subscribed, with the retail portion alone attracting bids worth 179 times the shares on offer, pushing the company to allot the maximum 12% of the offer to such investors.
The company’s shares closed at $62.01 in New York, valuing the company at $92 billion. Two of JD.com’s Hong Kong shares are worth one American depositary receipt, meaning its shares on the Hong Kong Stock Exchange would be worth HK$240.3 based on the New York closing price.