China’s fintech boom could help revive Hong Kong’s markets. Web groups like Alibaba have snubbed the territory to float Stateside. But a new breed of financial technology outfits with few global peers may find Hong Kong more welcoming. A few multi-billion-dollar listings would help make the city’s markets more dynamic.
Three of the world’s most valuable fintech startups are considering listing in the former British colony, according to media reports. They are Ant Financial, Alibaba boss Jack Ma’s $60 billion payments-to-web banking empire; Lufax, China’s largest peer-to-peer lender; and Zhongan Online P&C Insurance, backed by Ant and gaming giant Tencent. Together, the trio has a combined worth of $87 billion, based on their most recent fundraising rounds. Their venture capital backers will presumably hope for higher valuations from public markets investors.
The listings would probably happen next year. They would be a huge victory for Hong Kong, which prides itself as China’s gateway to global capital markets. In the past, thanks to companies like Amazon, Google and Twitter, tech-related groups from the mainland chose to list in the United States, partly because investors and analysts there have a better understanding of the sector. Lax U.S. rules on voting rights also helped. China’s top online shopping platform, search engine operator and microblog are all listed in New York.
This is no longer the case for Ant, Lufax and a new wave of tech upstarts with few or no global competitors. Ant, for instance, houses China’s largest mobile-payments network, Alipay, as well as an online bank and fund-management arm. Hong Kong investors would have a clearer understanding of these businesses than those Stateside. Last month, Chinese selfie-app maker Meitu filed for a Hong Kong flotation. Few in the United States would get the appeal of the product or have heard of the company.
The bigger prize for Hong Kong would be a shift away from old-school finance and property, which together make up over half of the benchmark index, towards faster-growing, more innovative companies. New issues are currently dominated by state-owned mainland banks and corporations, whose listings often rely on the support of other state businesses. Snagging two or three fintech stars may spur others to follow.
This view is a Breakingviews prediction for 2017. Click here to see more predictions.