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Companies

Alibaba rethinks Hong Kong listing amid political turmoil

Chinese companies wary despite overtures from city's exchange

Political instability in Hong Kong casts a shadow over the city's status as a global financial hub.   © Reuters

NEW YORK/SHANGHAI -- Political instability linked to months of ongoing protests in Hong Kong is denting the city's appeal as a capital market for Chinese companies looking to raise funds publicly.

Chinese e-commerce company Alibaba Group Holding is considering pushing back a Hong Kong public offering planned to accompany its listing on the New York Stock Exchange, the New York Post reported Wednesday.

The online retailer had applied to list its shares in Hong Kong, a global financial hub, to diversify its funding sources and improve liquidity. It initially appeared to be targeting $20 billion from the public offering, but some Chinese news outlets later reported it had slashed that target by half. Alibaba appears to be feeling pressure to revise its strategy as troubles engulfing the Hong Kong market cast a pall over fundraising prospects.

Alibaba declined to comment.

Over the past couple of years, Hong Kong has reformed its listing rules to attract more "new economy" companies, especially those from China which operate in the technology and biotech sectors. Since then, the exchange has drawn tech heavyweights such as Xiaomi and Meituan-Dianping, as well as cancer drug developers including BeiGene, to sell shares there.

In May, before protests erupted in the city over its now suspended extradition bill, Hong Kong Stock Exchange Chief Executive Charles Li declared the bourse "has seen a much higher proportion of listings of new economy companies, thanks in large part to China's scientific and technological innovations."

Drew Bernstein, co-managing partner of MarcumBP, a New York-based firm advising Chinese companies listing in the U.S., said that Hong Kong remains an attractive listing destination, but "in terms of listing at the moment, disruption to local transport creates a situation that is not conducive to holding an IPO roadshow."

"Businesses that are strong and growing right now will look to do an IPO as quickly as possible given the macro risks. So, now, there is an added level of uncertainty that boards and CEOs will take very seriously," Bernstein said. "As we meet with pre-IPO companies, we talk about the trade-offs among the different markets and CEOs will weigh relative valuations, depth of capital market, and access to follow on financing very carefully."

Uncertainty in Hong Kong has also led to a shift of interest back to the U.S. capital markets despite Sino-American trade tensions, according to those who work with Chinese companies through their IPOs.

"We haven't had anyone say that directly, but we worked with a number of Chinese companies that had been thinking of listing in the U.S., and I think [the situation in Hong Kong] probably reinforced their decision to list here," a New York-based investment banker told the Nikkei Asian Review, asking not to be named.

"It increases the relative attractiveness for global Chinese companies to list in the U.S. over Hong Kong -- yes, absolutely," the banker said, adding that he expects Hong Kong exchange to recover once -- and if -- the unrest is settled.

Nikkei staff writer Coco Liu in Hong Kong contributed to this report.

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