Hong Kong Exchanges CEO Chan on Strategy, IPOs, Saudi Arabia MOU

You’re coming to the top job at a very critical time when this IPO market we talked about has been quite depressed for the last two years, but there’s still some signs of hope. Stock market turnover, this bull market that we’re seeing coming back here, seems like Hong Kong’s gaining a bit of mojo right now. Can you tell us what your priorities are going to be? Yes, absolutely. So today is actually I’m in my 11th week as the CEO of HKX, very proud to be taking this role. I issued actually a block a few weeks ago and I give it a title redefining Resilience. I think you know as you know there are so many changes happening around us, I call them the forward changing global orders right. Geopolitically as you alluded to, we are also seeing you know a lot of different ways people are raising capital. So capital formation is changing on the technology front obviously we’re seeing seeing a lot of exciting technology coming to disrupt you know the old ways that we’re doing things. And last but not the least, just the way financial markets are arranging themselves are very different from at least you know the time when I started my career. So I missed all this. I think what we want to focus on at HKX is really first of all to play to our China strength, really build on it. I think that’s how Trump cut definitely and then surrounding it really three strategic imperatives that we are very focused on. The first one being our efforts to continuing to continue building the market vibrancy and to create that network effect. What that entails is really to bring more issuers, more investors and more products into the ecosystem. You mentioned about that what what you know, your predecessor, Nicholas Arguzin talked about this great IPO pipeline that was coming. Yes. When do you think this will finally materialize? I think, well, first of all, as you probably know, only a few weeks ago on the 19th of April, the CSRC issued 5 measures which will, you know, provide a lot of support to our capital markets. Three of which are very closely related to the stock connect mean, including a relaxation of the ETF eligibility standards, inclusion of REITs into the Connect franchise as well as the southbound RMB counter inclusion into the stock connect. Also there is a very exciting one which is the fifth one, which is to bring high quality right top notch companies from the mainland to come and list in our market. I think all that is creating a lot of excitement and I will share with you that actually since the announcement of those five measures, we have received so many calls you wouldn’t believe from potential issuers really wanting to explore doing an IPO in our market. So that’s going to add on to the already quite robust pipeline. Now in terms of when plenty IPO has been lined up since those measures come through, well we have the the 100 companies or applicants in the pipeline already. And I think with the latest measure and you know really that excitement and and a lot of proactiveness in terms of reaching out to us, I can really only see that building up. So for us obviously we need the market conditions to also be a lot more conducive to getting the IPO’s done. But I think what we’ve seen lately, especially the last two weeks of April is giving us a lot of hope. Yeah, Yeah, when they mentioned the Beijing that they will support leading industry names. What is your interpretation of that? Is that are we going to get these blockbuster names coming back here in the city. My interpretation first of all in terms of sector, what we can do really to complement the the domestic exchanges in the mainland is to focus on the new economy. That’s what we have done very well since 2018. And as you know, we have issued a new chapter in our listing rules, Chapter 18 C, which focused on what we call specialist technology. And these are really the sectors I think investors are most interested in at this juncture, including things like artificial intelligence, new energy, new materials, quantum computing. And so while I have, well, I, I really want to sort of see more names coming and I don’t know whether they’re only confined to this space. I have a feeling that a lot of them will be in the specialist technology space, OK. Does that include the likes of and financial DD, I mean these are names I know everyone that’s watching right now to share specific names, right. I I, I truly believe that you know the, you know given how how much growth we’re still seeing coming out from the mainland, this is going to really give us a very interesting batch of new new IPO. What’s that risk though of still some of these Chinese companies bypassing Hong Kong and just listing domestically? Yeah, I think we need to really think about our strength as a capital raising platform. We have of course overtime demonstrated our ability to support mega IP OS, right, you know 10s and you know 10/20/30, you know plus billion U.S. dollars have been raised successfully in our market. So and our trump card is really the Connect franchise, right. We have to remember that HKX is the only platform which if you get a listing, you know on our exchange, you have access not only to international money, right. You also have that unique opportunity to tap into the very vast number of investors on the mainland through our Connect franchise, right. So that’s our USP, that’s our unique selling point. You mentioned 20-30 billion, these sort of old capital raising targets or numbers that you’ve had, I mean it seems like we’re far off that now. I mean 2023 was the worst in 20 years this quarter alone we’ve only seen less than a billion capital raised, right. So you’re how confident are you that going to get back to those glory days? OK. So I think you know the fact that the, the fundraising you know which took place last year if for example was not as high at as high a level. I think it’s a reflection of really the macro conditions as well as the fact that you know interest rate environment, it’s not particularly conduced of your control. Yeah, yeah. And you know if you are a business owner, right and you see the, the valuation you always feel that you can fetch a higher evaluation for your company. So I I don’t think that’s a structural problem. I I really think that that’s just a reflection of market conditions and you know when things you know get get better and you know interest rates should come down. I I really think that you know we we will be seeing a lot bigger IP OS coming back into our market apart from IP OS dual listings of A shares. How big of an opportunity is that for Hong Kong exchange as well We just learned that Medea is also refiling its its application here in Hong Kong. Yes. So and on the 12th of April, the State Council also issued what is called the new 9 measures, which is very focused on improving the Asian market. And if you read it, you know there are a few measures talking about raising the eligibility requirements, accelerating the listing on the Asian market etcetera. So I think it’s, it’s a good thing that you know, they are continuously making improvement to the Asian market. But at the same time the fundraising needs of a lot of these companies which are listed on the Asian market, you know is still very real, right. So I think what I see is really a big set of opportunities for us and Hong Kong to provide that alternative fundraising channel for these companies which are continuing you know the development of the business. So hopefully we’re going to also see a pickup of these Asia listed company exploring an Asia listing which will add to their fundraising capabilities. Hong Kong exchange has also vowed to bring in more international sort of names here, but lately we’ve heard the likes of Los Sotans, Samsunite may have plans to delist. There seems to be a perception out there, Bonnie that Hong Kong no longer is that destination for for liquidity. How do you at least reverse that sort of. So first of all, you know in terms of the privatization activities that we’ve seen, it’s it’s I think quite common to see you know when the valuations are at a lower level, but that’s again not a structural problem, it’s just sort of how, how, how companies choose to to manage their their, their capital raising and all that. Now I would say that the liquidity is definitely something that we are very focused in terms of working on and I also am very hopeful because you know it well going back to my, my point about the volume, you know that we’ve seen in the last two weeks of April, right. It doesn’t take a lot. You know it can come back very quickly. So I think you’re looking at our fundamentals. I don’t think we’ve changed. We are still a very compelling location for for you know capital to meet opportunities right, for investors to deploy the capital and also for international company. I go back to this point about the possibility of stock connect inclusion, This is unique right. So I guess you know as the Chinese economy continue to to to recover and get stronger as mainland investors continue to want to diversify ways that they invest their capital, their money, the opportunities for international companies seeking to fundraise in Hong Kong is immense. I want to talk a little bit more about obviously the Saudi event and and what you’re you’re doing here this, this today as well. I mean obviously what is the international strategy right now? I mean your predecessor also was all about opening offices abroad. What’s your move going to be? OK. So why don’t we focus on this event, which we were very excited about. So last February, we signed an Mou with Saudi title War Group. And after that we’ve done a few things. We have recognized Saudi as a recognized Stock Exchange, meaning that company listed on the exchange can come to Hong Kong for a secondary listing. We’ve also now listed the first Saudi ETF, which is the biggest ever in the world and the first in Asia. And we also held FII priority last year last December. Now this very exciting CMF, apparently 1000 people have signed up who have only seats for 500 and they will be filled very quickly. There will also be 300 plus bilateral meetings. What we’re doing is matchmaking, which I think is it’s a really good, you know, step to foster relationship powering connections, which is the theme of this event. But more importantly with those connections being forged, it’s just a matter of time that we’re going to see both Saudi companies listing on our exchange and vice versa. Saudi Aramco certainly is the one that everyone wants to talk about. That’s all the buzz. The second listing where they’re going to be listing, what are conversations like now? Can you give us any sort of good news and what can you Hong Kong exchange do next? OK. I think all I can tell you is that the dialogue is very alive. You know not you know only for specific names but but you know really generally and like I said earlier, right, this is the occasion where we continue to match, make, continue to power connections and so you see other companies listing here as well. Is that the potential? Well that’s definitely the objective of, you know, building this relationship, right. It will take time, you’re right. But again, with an event like this and with so many parties participating both on the investor side as well as the corporate side, you know, I’m really hopeful that it’s just a matter of time that we’re going to see, you know, our efforts bear fruit fruits.