Hopewell Highway Infrastructure’s (HHI)
share placement marked the Hong Kong Stock
Exchange’s (HKEx) first dual counter equity
security. Its novel structure paves the way for Hong
Kong-listed companies to access renminbi (RMB)
Although Hong Kong’s equity capital
markets have been quiet this year with only one initial public
offering (IPO) since July, this issue represents a new way for
HK-listed companies to attract Chinese investors.
Listed on October 29, the security is fully
convertible between HKD and RMB. In a
statement, HKEx Chief Executive Charles Li said that HKEx
expects interest in RMB products to continue to grow with the
increasing internationalisation of the RMB.
Freshfields’ Charles Ching, who advised
placing agent BOCI Asia, said the deal enhanced Hong
Kong’s position as the leading offshore RMB
centre. "It represents a further diversification of RMB
products available to investors, and provides issuers with a
new capital raising model," he said.
Ching added that the HHI placement may be an
especially attractive capital raising model for issuers that
have their main business operations in mainland China, as they
would be able to raise capital in their operating
The RMB/HKD transfer
But deal counsel had to educate investors about the
transfer mechanism between the RMB and HKD shares, for which
technicalities and the relevant disclosure had to be
It was also essential to ensure liquidity in the RMB
tranche, price equality between the RMB and HKD tranche and
maintain equal treatment of shareholders.
To do so, issuers need to focus on making sure that
RMB and HKD traded shares are identical in all respects,
including shareholder rights, to ensure full transferability
between RMB and HKD shares, commented Ching.
Equity capital markets have recently slowed in Hong
Kong – the October HKEx-listing of Fosun
Pharmaceuticals was the first since July and tumbled on its
debut. Nonetheless, deal counsel said that the placement could
encourage issuers in the city looking for new capital, or
investors looking to diversify their holdings.
"Currently there is a sizeable RMB pool in Hong Kong
with relatively few products to invest in," said
Indeed, dual-counter equities could be the next
logical development in
Hong Kong’s growth as an international financial
centre: aside from attracting RMB investors, it reasserts
its place as the leading offshore RMB centre.
RMB and HKD-denominated equities have proven popular
as Hong Kong’s IPO market remains quiet. Before
the HHI share placement the HKEx saw the listing of the first
dual-counter ETF on October 12, the Harvest MSCI China A Index
But there are concerns about RMB-denominated offerings
as the Chinese economy slows. In a transaction that was meant
to demonstrate Singapore’s up-and-coming status as
an offshore RMB hub, Hong Kong tycoon Li Ka
Dynasty Reit announced a RMB IPO on the Singapore Exchange
in late October. However that transaction was pulled due to
poor market conditions.
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