Ventures Dialogue

After a fantastic year for IPO’s on the Hong Kong Stock Exchange (HKEx), it was not at all surprising that a standing-room only crowd at the Prospectus and Developers Association of Canada (PDAC 2010) Convention in Toronto was eager to hear from visiting Secretary for Financial Services and the Treasury, Professor K.C. Chan, and HKEx Chairman, Ronald Arculli, about Hong Kong and on how HKEx has become one of the most active markets in the world.

HKEx ranked Number 1 globally in 2009 for IPO fundraising (US$31.3 billion), and Number 4 globally in terms of total fund raised, including post-IPO, of US$81.4 billion. A total of 73 companies were newly listed on HKEx and they included overseas companies which have listed their Greater China related business operations in Hong Kong. “Companies are attracted to list in Hong Kong to benefit from our market’s liquidity, attractive valuations and access to investors in Asia,” said Professor Chan.

2010 has already started off well, Professor Chan said at the PDAC Seminar in March on “Listing and Capital Raising in Hong Kong for Mining and Natural Resources Companies”, with SouthGobi Energy Resources, owned by Canada’s Ivanhoe Mines, raising USD$439 million through a secondary listing on the HKEx, just days after Russia’s UC Rusal, the world’s largest aluminium producer and the first ever non-Asian company to have a primary listing in Hong Kong, raised USD$2.24 billion.

It is expected that at least nine other foreign mining companies will be listing in HKEx this year, said the Secretary, some of which are from Canada. Professor Chan encouraged Canadian natural resources companies in particular to list on the HKEx so as to take advantage of China’s seemingly insatiable appetite for raw materials, as well as the liquidity afforded by the Mainland’s wealthy, upper and middle-class who are very active investors on the HKEx. He pointed out that companies incorporated in British Columbia and Ontario are acceptable for listing in Hong Kong and that HKEx has adopted international standards and practices to facilitate dual listings, with no capital controls and no capital reporting requirements.

But market liquidity is only one reason why Hong Kong is the financial centre of choice by Asian companies seeking to raise capital, including over 520 Mainland enterprises having a total market capitalization of over C$1.3 trillion. Hong Kong has always been an important gateway to China and close cooperation between the two, such as with the Closer Economic Partnership Arrangement (CEPA) and a variety of specific projects with Guangdong Province and the Pearl River Delta Region to enhance financial products, capital and talent, further strengthen Hong Kong’s intermediary role.

“With a highly open and international financial platform and the unique advantage under the ‘One Country, Two Systems’, Hong Kong is best positioned to serve as a gateway to China to capitalise on China’s growth,” Professor Chan said. Investors have a fair and open playing field in Hong Kong which attaches great importance to corporate governance and transparency in maintaining a high quality market.

Hong Kong has also weathered the financial tsunami better than most of the world’s countries and the government is cautiously optimistic that 2010 will bring continuing improvement. The job market and overall economic performance both indicate that Hong Kong’s economy has shown great resilience in the face of external economic shocks. Residing next door to the world’s strongest economy, Professor Chan said, Hong Kong provides an abundance of business opportunities. For, despite the world recession, China’s economy still grew at astounding 8.7% in 2009 and will reach 10% in 2010. Now is the time, he said, for Hong Kong and Canada to ride the wave of a rising China.

Immediately upon his arrival in Toronto, the Secretary for Financial Services and the Treasury delivered a keynote speech at the Confederation of Greater Toronto Chinese Business Association annual gala “Oriental Fantasia – Hong Kong and Shanghai”. He told the 700 guests there that “Hong Kong and Shanghai serve different financial markets,” and both have different skill sets and are at different stages of development.

“We look forward to co-operating with Shanghai to exploit our relative strengths, share our experiences and maximise the synergy between us in becoming the twin engines of growth for our nation,” Professor Chan said.

The Secretary also spoke on “China’s Rise as an Economic Power” at the Rotman School of Management of the University of Toronto during his whirlwind visit. He reminded his audience that “the new wave of financial globalisation has brought a new wave of financial talent to Asia, and to Hong Kong.”

“As countries in the West continue to grapple with the aftermath of the financial tsunami, Asia is rebuilding, refocusing and rebounding,” Professor Chan said. “Hong Kong is a vantage point, actually the best available platform, for seeking out the best opportunities in China and throughout Asia.”