Aug. 15 (NBD) -- The mechanism which would bring stocks with different classes of voting rights into the trading links between the mainland and Hong Kong is likely to be launched soon, remarked Charles Li, Chief Executive of Hong Kong Exchanges & Clearing Limited ("HKEX", 00388.HK) at a media briefing on Wednesday.

This means investors in mainland China will be able to buy shares of some popular technology companies with weighted voting rights that got listed in Hong Kong such as Xiaomi (01810.HK) and Meituan-Dianping (03690.HK).

With regard to Alibaba's listing on HKEX, Li didn't detail but showcased his buoyancy, noting that it will happen sooner or later.

File photo/Liu Chunshan (NBD)

Less large IPOs

HKEX released on Wednesday the interim financial report of 2019, showing that in 1H 2019, 84 companies were newly listed on HKEX, down 17 percent from 101 in 2018, and the number of companies which resorted to withdrawal of IPO application presented a growth. The number of large IPOs logged a slide, Charles Li admitted. 

National Business Daily noticed that Asia Pacific unit of the largest global brewer Anheuser-Busch InBev, which scheduled to be set the offer price on July 12, decided a day later to pull the plug on the multibillion-dollar IPO on HKEX. The IPO was slated to be Hong Kong's largest this year.

Moreover, the report also indicated a sharp fall in the trading volumes of HKEX. ADT of equity products traded on the stock exchange slumped to 75.1 million Hong Kong dollars (9.6 million U.S. dollars), down 25 percent from 100.4 million Hong Kong dollars in 2018. 

"The market has seen volatility recently with drop in the trading volumes and less risk appetite of investors," observed Charles Li.

At the same time, stocks on the Hong Kong exchange no longer shine with high evaluations. According to the China unit of audit firm Deloitte, among all the newly issued stocks on HKEX in 1H 2019, the proportion of those with a price earnings ratio (P/E) of 5-10 times rose by 70 percent while those with a P/E of 40 times and above descended by 40 percent.

To date, the HSAHP index, a barometer to measure the price difference of A shares over H shares for the most liquid Chinese companies with both A-share and H-share listings, has climbed to 132.17 from 118.65 early this year, reaching record high since March, 2018. "This chiefly relates to the supply-and-demand relationship in different places," explained Li, "Investors' view on the evaluations of companies varies." 

Revenue growth registered

Despite the market sentiment, HKEX delivered a stable growth in the first half of 2019. The financial report showed the exchange operator's revenue and other income and profits attributable to shareholders hiked respectively by 5 and 3 percent, reaching 8.6 and 5.2 billion Hong Kong dollars.

One of the main reasons for the growth, as stated in the report, lies in the record Stock Connect revenue, driven by the feel-good factors brought by the successful inclusion of China A shares in MSCI and FTSE Russell indexes this year.

According to the report, revenue and other income generated by Stock Connect were logged at 508 million Hong Kong dollars in 1H 2019, up 39 percent from 2018.

Stock Connect Northbound ADT also saw a record half-yearly high in 1H 2019, standing at 43.9 billion U.S. dollars, more than double that of the previous record achieved in 2H 2018. 

The dramatic growth in the net investment income is another chief reason. In the period ended June 30 of 2019, net investment income of HKEX was registered at 1.519 billion Hong Kong dollars, up over 91 percent from the previous year.

According to HKEX, the net investment income includes fair value gains on collective investment schemes and higher interest income.

Email: gaohan@nbd.com.cn