Many Chinese companies are going to Hong Kong for initial stock sales, according to an study produced by KMPG, a global auditing service based in the Netherlands. The shift is pushing Hong Kong to the top of the global market for initial public offerings (IPO).
On Oct. 26, Rupert Hoogewerf published the Hurun Cash Out Rich List 2018 showing that Jack Ma — head of China’s biggest conglomerate — is selling off stocks to gain liquid assets.
The Hurun report listed China’s top 30 magnates, each of whom has collected more than $166 million in cash from the stock market in the period from July 1, 2017 to September 30 this year. Collectively, they made a total of over $12 billion.
Jack Ma, co-founder and executive chairman of the Alibaba Group, a multinational technology conglomerate, is number one in the list. He withdrew 11 billion yuan ($1.58 billion) from the market via selling his Alibaba stocks.
The LEXUS Hurun China Rich List, published on Oct. 10 and citing data from Aug. 15, listed Jack Ma as the richest person in China, with assets of 270 billion yuan ($38.8 billion).
Kung Hung Ka (Gong Hongjia ) and wife Chen Chunmei, vice chairman and the second largest shareholder of security equipment supplier Hikvision, were listed together as second, having sold 7.9 billion yuan ($1.35 billion) of Hikvision stocks. Kung and Chen rank 31st on the rich list, owning wealth of 59 billion yuan.
Yang Huiyuan, the richest woman in Asia and majority shareholder (55 percent) of Chinese property developer Country Garden Holdings, collected 6.3 billion yuan from selling stocks in Hong Kong and was the fourth richest Chinese, owning 150 billion yuan.
Yan Zhi, chairman of Zhuo’er Holdings, has sold 6.3 billion yuan of his company’s stock; Fang Wei, chairman of Fangda Conglomerate, sold 4.4 billion yuan of stocks from Fangda Carbon New Material and Fangda Special Steels; Xu Rongmao, founder and chairman of Shimao Property, sold 3.8 billion yuan of its stocks.
Among these 30 magnates, 21 are listed in the top 100 of the 2018 LEXUS Hurun China Rich List, and four rank on the list’s top 10.
International Finance, a Chinese state-run financial newspaper, reported on Oct. 26 that there are 174 Chinese companies have gone public in Hong Kong this year, six more than the number for 2017.
Of the 174, smartphone supplier Xiaomi and hotpot restaurant Haidilao collected enough money to send their co-founders Lin Bin of Xiaomi and Haidilao’s Zhang Yong and Shi Yonghong to the top 100 of 2018 Forbes China 400 Rich List. The three had not previously been listed.
CNBC quoted global financial services giant KPMG on Sept. 24 as saying that Hong Kong is on track to be the biggest IPO market globally in 2018: “Following a strong third quarter, KPMG forecasts total IPO fundraising in Hong Kong to reach more than HK$300 billion ($38.4 billion).”
In 2017, total IPO fundraising in Hong Kong reached 122.6 billion Hong Kong dollars. In the first three quarters of 2018, total IPO fundraising exceeded that figure and reached 238.2 billion Hong Kong dollars. In 2018Q3, Chinese state-owned wireless infrastructure operator ,China Tower, made the biggest IPO deal of the year so far, valued at 54.3 billion Hong Kong dollars, Bloomberg reported.
So Pei-ke, a columnist with Wealth, a Taiwanese financial magazine, said that wealthy Chinese are moving their wealth out of the mainland by going public in the Hong Kong market to collect Hong Kong dollars and liquidate their Chinese stocks.
Official data supports So’s commentary. On Oct.26, China’s Foreign Exchange Bureau published a report noting that the bank foreign currency settlement deficit in September was $17.6 billion, making it the third consecutive month in which China sold more foreign currency than it received.
The People’s Bank of China, the country’s central bank, published data on Oct. 7 saying that by the end of September, China’s foreign-exchange reserves decreased to $3 trillion, their lowest point in 2018. China owns $1.8 trillion of foreign debt.
By comparison, data from the end of 2016 shows that China had $3.01 trillion in foreign exchange reserves and owned $1.4 billion in foreign debt. Leveraging the trade deficit of $422.5 billion in 2017 and $135 billion in the first half of 2018, at least $930 billion has left China.