With three years having passed since the Hong Kong Stock Exchange (HKEX)’s decision to allow pre-revenue biotechs to IPO, we look back at a stellar 2020 for the Exchange and what the recent appointment of a new CEO – the first foreign appointment in its history – means for the future direction of HKEX.
2020: Stellar Performance Despite COVID Headwinds
Under the tenure of previous CEO Charles Li from 2010 to 2021, the market capitalization of HKEX companies more than doubled to HKD 53 billion (USD 6.7 billion) and it became the most popular global IPO venue for seven of the past 12 years. In 2020, companies listing on HKEX raised HKD 398 billion, the highest year-on-year total in a decade, despite the volatility in global capital markets thrown up by the COVID-19 pandemic.
Hong Kong’s healthcare listings performed particularly well in 2020, with 23 companies (including 14 pre-revenue firms) completing IPOs and raising a total of HKD 98 billion. Since the listing reforms of 2018, healthcare companies listed in Hong Kong have seen an average 63 percent gain in stock prices post-IPO.
Last year, Charles Li was bullish on HKEX’s potential to expand its biotech listing footprint even further and establish itself as the world’s premier venue in the field. “There is no question we are one of the only two real global biotech [equity fundraising] centres,” he said. “I’m sure, in the next five years, 10 years, or at some future time, we will be number one.” Li added that Chinese scientists are “among the best and brightest around the globe,” and that “There is no reason why they will not bring us to the top of the world.”
A New CEO (and a New Era?)
Despite these positive indicators, months of social unrest and the introduction of a national security law which ties Hong Kong much more closely to mainland China mean that many international investors retain reservations about the Hong Kong market. The retirement of long-serving CEO Li in late 2020 added to a sense of uncertainty.
However, rather than take a conservative approach in appointing a new leader, HKEX has moved to bring in the first foreign CEO in its history; maverick Argentinian banker Nicolas Agustin. The HKEX board is hoping that Agustin, who has spent his entire career at JP Morgan and is nicknamed ‘Gucho’, can reassure investors of Hong Kong’s continuing international outlook. The fact that he is neither Chinese nor American is also potentially beneficial should US-China relations worsen.
While ‘Gucho’ has not yet outlined his strategy for HKEX in full, he does talk about expanding the exchange while remaining “anchored to China” in an introductory video posted on the HKEX website. Challenges he will face in the role include an expanded universe of rivals, including the Shanghai Stock Exchange’s Nasdaq-style Star Market, which already hosts Chinese COVID-19 vaccine manufacturer Cansino Biologics, the reforming Shenzhen Stock Exchange, and new entrants in Macau and Guangzhou.
Expansion may come in the form of acquisitions; HKEX successfully acquired the London Metal Exchange in 2012 but failed dramatically in a bid to buy the London Stock Exchange in September 2019. Tying such a significant Western exchange more closely to Chinese capital markets could have benefits for both Beijing and Hong Kong, according to some analysts.
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