HKEx – Asia’s Global Market Lawrence Fok Chief Marketing Officer Hong Kong Exchanges and Clearing Ltd 30 September, 2011
Benefits of Listing in Hong Kong The World’s Leading Hong Kong IPOs’ fund raising in 2009 and 2010 were the largest in the world. Fund Raising Venue YTD Aug 2011, the IPO funds raised in Hong Kong also led the world at USD24bn.* The ability to attract an impressive investor base from both local and overseas Diversified Investor Base investment communities. New issuances can attract strategic investors. Unparalleled Liquidity Free flow of capital and deep pool of liquidity. Companies with emerging markets stories often enjoy higher valuations in Hong Kong Higher Valuation compared to other global and Asian stock markets, examples are Consumer and Potential Resource sectors. China’s QDII program allows Mainland China funds to invest in Hong Kong. RMB IPOs Capital from Mainland China facilitate overseas companies business expansion in Mainland China. The recent amendments of Hong Kong Listing Rules have brought Hong Kong in line Global Mining Center with globally recognized listing standards for mining and natural resource companies. Hong Kong has a well-established legal system based on the English common law, and International Financial adopts Hong Kong FRS and IFRS. Our Listing Rules are highly regarded by Center international investors. 2 2 *Source: World Federation of Exchanges
The World’s Leading Fund Raising Venue IPO Funds Raised The aggregate IPO funds raised in Shenzhen, Shanghai and HK was about 2.1x of that of NYSE, NASDAQ and LSE in 2010 (USD bn) China 70 US+UK (USD130.8bil) (USD62.1bil) 57.3 60 50 44.3 40 33.8 29.2 30 #1 20.1 #2 20 #3 #4 8.2 10 #6 #10 0 Hong Kong Shenzhen Shanghai NYSE London Nasdaq Source: World Federation of Exchanges (Full Year 2010) 3
Strong IPO and Post-IPO Fund Raising Capability (USD bn) 47% 61% 50% 36% 85% 45% 45% 53% 66% 64% 50% 72% 39% 55% 55% 53% 34% 60% 15% 28% 47% 40% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD Aug 2011 IPO 3 7 8 12 21 43 37 8 32 58 24 Follow-on 5 8 20 24 17 24 38 46 50 52 20 Source: HKEx 4 4
World’s Top 10 IPOs 4 out of 10 were listed in Hong Kong ( 2006 – Q1 2011 ) Funds raised in USD bn 25 22.1 22 20.5 19.7 20 18.1 5.9 10.1 15 11.1 11.2 10.6 10 8 7.3 16.1 12 5 0 (2) (1) (1) ABC ICBC AIA Visa General BOC Dai-ichi Rosneft Oil VTB Bank CSCE Motors Life (1) A shares listing in Mainland China (grey portion), H shares listing in Hong Kong (green portion); (2) China State Construction Engineering Source: Bloomberg 5
Quality Market Attracts a Diverse and Expanding Global Investor Base Hong Kong Investors QDII Mainland China International Investors Investors Currently account 45% from Europe for 5% of turnover 24% from US and growing rapidly 16% from Asia [There are about 100 m investors] Global Investor Base 46% investors all over the world 64% institutional investors Source: HKEx Cash Market Transaction Survey 2009/2010 6 6
Leading Institutional Funds are Attracted to Hong Kong Hong Kong offers a quality market that attracts leading global institutional funds Leading Institutional Funds in Hong Kong More fund managers are moving to Hong Assets Under Kong to get closer to the demand side of Management Institutions the commodity equation (USD bn) JPMorgan 190 Franklin Templeton 133 Fidelity 108 BlackRock Global Funds 105 Schroder 80 Goldman Sachs 64 HSBC 58 PIMCO 53 Others 521 Total 1,312 Source: Bloomberg 7
Building a Strategic and High Profile Investor Base Through listing in HK, a company can attract Strategic Investors at different stages: Pre-IPO Cornerstone Post-IPO Investors Investors Investors Pre-IPO investors introduced Introduced at the time of listing Introduced after listing before listing Investment price is same as Major benefits: Major benefits: IPO price, but subject to six To build up the reputation New funds to support the month lock-up period and corporate prestige growth Major benefits: To facilitate global Strategic investors improve Well known funds / expansion strategy internal control and investors may help to build operational efficiency to up investor confidence better prepare for listing during roadshows Interim guidance on pre-IPO investment (market consultation will soon be conducted): Pre-IPO investment must be completed either: (a) at least 28 clear days before the date of the first submission of the first listing application form, or (b) 180 clear days before the first day of trading Pre-IPO investments are considered completed when the funds are irrevocably settled and received by the applicant 8
Strong Market Liquidity HKEx average daily market turnover USD (bn) 9 9
Higher Valuation Potential Energy Consumer Goods Consumer Goods Consumer Goods P/E: 27.59 P/E: 64.65 P/E: 35.71 P/E: 42.19 Mongolia France Italy Taiwan Services Services Services IT P/E: 35.71 P/E: 29.74 P/E: 19.05 P/E: 40.16 US US US China Materials Financials Services Financials P/E: 37.17 P/E: 31.05 P/E: 26.68 P/E: 54.31 Malaysia Japan US France / Taiwan Above ratios are current P/E. Source: HKEx as of Jul 2011, Bloomberg as at 26 Jul 2011 10
RMB Internationalization (1) RMB Deposits Cumulative RMB in Hong Kong Trade Settlement Dec 2009 RMB 63 billion RMB 4 billion Dec 2010 RMB 315 billion RMB 510 billion Jul 2011 RMB 570 billion Over RMB 1,000 billion World Bank Global Development Horizons 2011 – “The most likely global currency scenario in 2025 will be a multi-currency centered around the dollar, the euro and the reminbi.”
RMB Internationalization (2) RMB Deposits in Hong Kong ( RMB bn ) 553 549 510 451 408 371 315 285 217 149 130 104 90 63 56 33 23 23 12 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 China’s vice premier Li KeQiang in Aug 2011 – In order to accelerate the pace of internationalizing the RMB, Li said today that, “China will keep supporting the use of RMB for foreign investment in the country and he has confidence that Hong Kong would remain the major offshore global financial hub for the currency.” Li said also “Hong Kong enterprises would have numerous chances to make direct investment in Mainland shares, with Qualified Foreign Institutional Investors permitted to invest in Mainland equity markets with a scope of RMB20 billion." Source: “Monthly Statistical Bulletin”, HKMA 12
Hong Kong as the Key International Market for Mining and Natural Resource Companies 3 June 2010 – New listing rules for Mineral Companies effective. Mineral Companies that have made a meaningful discovery and wish to raise development capital are now eligible to list in Hong Kong. Well received by practitioners. “ Hong Kong will become the largest mining finance market in the world .” Robert Friedland, Chairman of Ivanhoe Mines, March 2010. Market Cap Average Daily Natural Resource Average P/E Turnover in 2011 No. of companies as of 30 Jun 2011 companies (times) (USD m) (USD bn) Metals & Mining 88 176 14.7 480 Energy 75 277 20.2 698 Total 163 453 17.7 1,177 % of total market 11.3% 16.7% 12.5% Source: HKEx 13
Dually-listed Natural Resources Companies Distribution of Average Daily Turnover Rusal in Hong Kong since 2009/IPO Market cap: USD20,803m 6% IPO fund raised: USD2,230m 100% (Euronext) Average daily turnover: USD9.6m 90% 80% 47% SouthGobi in Hong Kong (TSX) Secondary listing on HKEx 70% Market cap: USD1,975m 60% IPO fund raised: USD393m 50% 94% Average daily turnover: USD1.8m (HKEx) Remarks: 40% Average daily turnover on TSX in 2009, 30% 53% prior to listing in Hong Kong: (HKEx) USD273,000 20% After listing in Hong Kong, average 10% daily turnover on TSX in 2011: increased to USD4.1m 0% Rusal SouthGobi Source: HKEx (as at 30 June 2011) 14
Competitive Advantages and Key Drivers for a Hong Kong Listing International listings – Key Drivers Examples Asia / China Nexus USD20.4bn USD20.4bn USD10.0bn* USD2.5bn USD2.2bn USD2.5bn US US Switzerland US Russia US Alignment of Issuers’ Growth Drivers and Shareholders USD2.2bn USD2.1bn USD1.9bn Russia Italy US Global Investor Base USD1.2bn USD786m USD1.6bn Secondary Listing Secondary Listing Brazil US France UK US Transparent and Efficient Listing Mongolian Mining Regime Corp USD745m Secondary Listing Secondary Listing Secondary Listing Secondary Listing Brazil Brazil UK UK Mongolia * including funds raising in London Source: HKEx 15 15
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