Chinese Online Retail Giant JD.com Debuts Successfully On Hong Kong Stock Exchange

Chinese e-commerce giant JD.com has raised nearly $4 billion as its shares debuted on the Hong Kong Stock Exchange on Thursday.

China's second biggest online retailer, JD.com saw its shares surge by more than 5% on its first day of trading on the exchange.

JD.com issued 133 million new Class A Ordinary shares in the secondary offering.

"We have come to Hong Kong not just because we want to share our promise and development with more clients... but because we have absolute confidence in China and the future of China's economy," JD's Retail Chief Executive Officer Xu Lei said at the opening ceremony. "If JD wants to become a truly global business, it needs more international capital and not restrict itself to a single country or region.”

The company said it will use proceeds from the offering to develop its supply chain technology.

JD.com also trades on Nasdaq under the symbol “JD.”

Ling Chenkai, vice-president of JD Retail, told BBC’s Asia Business Report that the Hong Kong listing can help promote the company’s brand in the Greater China area. "It also can help those Chinese investors and Asian investors to understand JD better and more clearer which can help us to gain trust from those investors and customers," he added.

JD.com said in the first quarter of 2020, its revenues climbed by 20.7% year-over-year.

However, JD.com has had its own controversies.

The company’s head of retail Xu Lei is gradually taking over the responsibilities of CEO from Richard Liu, who was arrested two years ago in Minnesota on suspicion of rape. Although Liu was not charged in the case, his accuser, a young Chinese student, filed a lawsuit against him last year.

JD.com’s initial public offering was the second biggest in Hong Kong this year -- Beijing-Shanghai High Speed Railway raised $4.3 billion in January.

Nikkei Asian Review wrote that JD.com's strong opening “could boost the hopes of companies that are lining up either for an initial public offering or a secondary listing [in Hong Kong] amid threats emerging from Washington about pushing Chinese companies off of American exchanges.”

Indeed, analysts expect more China-based stocks to list on the Hong Kong bourse instead of U.S. exchanges as tensions between Beijing and Washington escalate. Congress is mulling legislation that would require all foreign companies to adhere to strict U.S.-style accounting procedures and transparency protocols in order to list on U.S. exchanges. The proposed measure is viewed as specifically targeting Chinese firms.

Only last week, NetEase, China’s largest gaming firm, raised $2.7 billion on the Hong Kong exchange.

Last November, China’s biggest online retailer Alibaba (BABA) raised $13 billion in a secondary listing in Hong Kong.

Internet search giant Baidu (BIDU), which trades on the Nasdaq and fast food operator Yum China Holdings (YUMC), which trades on the New York stock exchange, are reportedly considering listing their shares in Hong Kong.

Other China-based firms mulling secondary offerings in Hong Kong include Zhenro Services Group, the property management subsidiary of Zhenro Properties Group; e-cigarette device maker Smoore International Holdings and surgical instrument manufacturer Kangji Medical.

“We think the standoff between the U.S. and Chinese regulatory authorities will force many Chinese companies to first think about a dual listing in Hong Kong or elsewhere, and wait to see how the final [security] law will be written," Citigroup said

Some 42 Chinese companies currently trading on U.S. stock exchanges qualify for listing in Hong Kong.

Charles Li, chief executive officer of Hong Kong Exchanges and Clearing, told CNBC that there is a “healthy” pipeline of Chinese companies coming to list in Hong Kong.

“It took me a little bit [by] surprise that all these IPOs despite all the challenges are coming here ... They are returning home ... many of the customers here want to be their shareholders,” he said on Wednesday. “If you look at Netease, even though it’s just listed for a few days, the center of gravity of trading seems to be migrating very healthily into Hong Kong.”

Massimiliano Bondurri, CEO of SGMC Capital, a Singapore-based asset manager said the listings on Hong Kong suggest a major shift in the global markets.

"This occurrence underlines once again how the political landscape of the world is rapidly evolving, with the globalization phenomenon we have been witnessing until a few years back quickly collapsing and an increasing number of barriers being established for international business dealings across the globe, resulting in a substantial increase in protectionism," he said.

Bondurri noted that as the U.S. exchanges seek to clamp down or block Chinese companies, more Chinese stocks will gravitate to Hong Kong.

"We expect an increasing number of other Chinese companies, both large and small, to follow in JD’s and Alibaba's footsteps," he said. "This will help diversify the risk for such entities and ensure that, should U.S.-China [trade] negotiations take a turn for the worse, they will not be shut out from markets as they would already have alternative arrangements in place to access capital markets.”

Christopher Hui, Hong Kong’s secretary for financial services and the treasury, told CNBC on Wednesday: “One of the key trends we have seen in Hong Kong insofar as our securities market is concerned, is that there’s increasing number of new economy companies coming to list here.”

Hui added: “We have very strong financial regulations, at the same time we are seeing many companies [that] would like to come back to Hong Kong to list for our proximity to China, yet at the same time being able to tap into the huge capital pool here in Hong Kong, with the international investors here.”