In the Capital Connectors series, exclusive interviews with six influential Chinese and global bankers reveal the opportunities and challenges for Hong Kong in its evolution as an international financial hub.
The listing of a Kazakhstan-based tungsten mining company in Hong Kong was evidence of the international scope and breadth of the city’s capital market, according to Xu Jia, deputy head of the investment banking department at China International Capital Corp (CICC).
Jiaxin International Resources – a Chinese-owned, Hong Kong registered firm that owns and operates a tungsten mine in Kazakhstan through a local subsidiary – had a dual listing on the Hong Kong and Kazakhstan exchanges on August 28.
The company had an international outlook and was focused on natural resources, distinct from Hong Kong’s traditional sectors such as finance, property and the internet, Xu said in an interview with the Post.
Jiaxin is not alone. In May, Singapore-based biotech firm Mirxes Holding, whose key markets include China, went public in Hong Kong. A month later, Thai company IFBH, incorporated in Singapore, made its debut in Hong Kong.
“Hong Kong still undoubtedly serves as an important bridge connecting the Chinese mainland and international capital,” Xu said. Regardless of whether the capital was from traditional sources such as the US or Europe, or from newer entrants such as the Middle East or Southeast Asia, “the role of Hong Kong remains unchanged”, he added.
Although most companies seeking fundraising in Hong Kong are from the Chinese mainland, an increasing number of firms from other regions and from a wider array of industries have also chosen to list in Hong Kong, Xu noted, adding that this momentum was likely to persist. “We are currently working on a few such deals,” he said.
They may be companies eyeing the Chinese market, overseas operations of Chinese companies, or “companies that have little or no connection to China but still find the Hong Kong market attractive and appealing”, he said.
Hong Kong sets itself apart from mainland markets like Shanghai and Shenzhen, which were subject to capital controls, through its unique ability to attract global capital, said Xu, a veteran investment banker who has worked in both Beijing and Hong Kong.
After a period of significant capital outflows driven by the Covid-19 pandemic and escalating US-China tensions, international capital was returning to Hong Kong.
The renewed interest started to emerge in September last year, when Beijing cut interest rates and ushered in a slew of measures to revive the property market and stabilise the stock market.
Interest in the tech sector was reignited after Chinese start-up DeepSeek captured global attention in January with the launch of its low-cost, open-source R1 reasoning model comparable to OpenAI-o1.
International investors have also been diversifying away from their overweight positions on US dollar assets since US President Donald Trump announced sweeping tariffs in April, which sent global markets into turmoil. Chinese assets, including those traded in Hong Kong, have been among the beneficiaries.
“There has been a noticeable return of capital from Europe and the US [and] more could come,” Xu said.
Hong Kong’s stock market has rebounded strongly after years of sluggish performance. In August, the bourse’s average daily turnover rose 192 per cent to HK$279.1 billion (US$35.9 billion), up from HK$95.5 billion a year earlier.
The city’s Hang Seng Index has rallied by 47 per cent in the past 12 months, with companies like Tencent Holdings nearly erasing all losses since reaching its all-time high in 2021, after which Beijing launched a regulatory crackdown on some of China’s biggest tech firms.
Funds raised through initial public offerings (IPO) in the first eight months in Hong Kong totalled HK$134.5 billion, nearly seven times the HK$19.8 billion raised in the same period last year, according to bourse operator Hong Kong Exchanges and Clearing.
Of the more than 60 IPOs in Hong Kong this year, the share of foreign cornerstone investors has topped the previous peak in 2021, according to a Goldman Sachs report published on September 18.
Schroders Investment, a British wealth management company, was a leading cornerstone investor in the IPO of Sanhua Intelligent Controls, a parts supplier to Tesla, committing US$142 million. “This is likely also their first cornerstone investment in a Hong Kong IPO in many years,” Xu said.
Hong Kong’s solid regulatory system and its supportive government have reinforced the city’s position as a safe harbour for global investors during turbulent times, Financial Secretary Paul Chan Mo-po said in June. “This is most obviously reflected in the recent upturn in our stock market and influx of capital as reflected in bank deposits.”
Some US$44 billion worth of capital flowed into Hong Kong-domiciled funds in the 12 months to the end of March, a threefold increase from a year earlier, said Chan. Hong Kong funds managed nearly US$4 trillion in assets as of the end of 2023.
CICC’s Xu noted that in the first half of the year most of the returning capital came from passive funds that tracked indices. However, starting in the second half, “we may see more capital returning from actively managed funds, especially those that focus on stock selection”, he said. - SOUTH CHINA MORNING POST
