120freespinshouseoffun| Looking at the current situation of the Hong Kong stock market from the sharp break of Chabaidao

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Tea Baidao, which has submitted its prospectus for more than half a year, is finally listed in Hong Kong today (April 23, 2024). This is the largest IPO in the Hong Kong stock market so far this year, raising 25%.120freespinshouseoffunHK $8.6 billion; it was also a poor market performance of the IPO, which broke at the start of the session, with the biggest intraday decline of 38 per cent. Seeing this situation, Honey Snow Ice City, Gu Ming, Shanghai Auntie …... It is estimated that the new tea enterprises waiting in line for listing on the Hong Kong Stock Exchange will be sad and have a great sense of crisis.

There are certainly many reasons for the breaking of tea at the company level and industry level. The new tea track is too crowded, from the lowest end of a few yuan to the high end of more than 30 yuan, there are national chain brands and local brands everywhere. Since 2022, the growth momentum of offline new consumption has obviously exhausted, and the only remaining focus of growth is no longer new tea. But,120freespinshouseoffunWhat I would like to discuss today is the reasons for the Hong Kong stock market-it turns out that the financing capacity of Hong Kong stocks has not yet returned to its best, and liquidity is, as always, a "sandwich cream" sandwiched between A-shares and US stocks. Numerous companies waiting to be listed and venture capital institutions all hope that Hong Kong stocks can quickly get rid of their current state and regain their strength, but this cannot be done overnight.

Let's first clarify why Chinese mainland (especially a new consumer company like Tea Road) has to go public in Hong Kong:

First of all, the RMB is not yet freely convertible at the capital level. In order to maintain the stability of the RMB exchange rate and the independence of monetary policy, the RMB has to sacrifice some international liquidity. Therefore, the liquidity of RMB-denominated assets in the world cannot be compared with that of US dollars and Hong Kong dollars. If a company takes a lot of foreign currency venture capital during the start-up stage, or if the founder wants to convert some of his assets into foreign currency, foreign capital markets such as Hong Kong stocks and US stocks will become the best choice.

Secondly, the A-share market not only has very strict requirements on the time of establishment, profitability and growth of enterprises, but also has restrictions on the industries in which listed companies are located. Offline catering consumption, including new tea, belongs to the category of strictly controlled and basically discouraged listing, because the authenticity of operating income is difficult to confirm. If companies such as Honey Snow and Ice City can be listed on A-shares, I believe they will be sought after by many institutions. Unfortunately, under the current rules, they can only try their luck in Hong Kong stocks.

Third, compared with the strong US stock market, the Hong Kong stock market is closer to Chinese mainland, there is no jet lag, and the proportion of funds with mainland background is relatively high. The US stock market favors industries such as the Internet and high-tech, where it is difficult for Chinese consumer companies to enter the mainstream. Hong Kong stocks have a long history of taking over Chinese offline consumer companies, such as Helens three years ago, Nai Xue's tea, and earlier soaking Matt, and so on.

Between 2019 and 2021, it is fashionable to list Hong Kong stocks. Chinese Internet giants that have been listed in the United States have also chosen Hong Kong stocks for secondary listing, and have achieved a large trading volume in Hong Kong stocks. However, later facts have repeatedly proved that when the general environment is good, Hong Kong stocks have the ability to add icing on the cake; when the general environment is bad, Hong Kong stocks do not have the ability to provide timely assistance. The absorptive capacity of Hong Kong stocks to IPO (non-secondary listing) is particularly low, not only in Tea Baidao, but also in the vast majority of IPO in 2022-2023. Even extreme Rabbit Express, which is a high-quality company in Asia, did not perform very well after the listing of Hong Kong stocks. In view of this, the rookie simply cancelled the Hong Kong stock listing plan.

Illiquidity has been a persistent problem in the Hong Kong stock market for many years. Due to the limited local investor base, the trading value of Hong Kong stocks has always been a fraction of that of US or A-shares. Extreme Rabbit Express, which was listed in October 2023, can be regarded as one of the few "star IPO" in Hong Kong stocks in recent years, with an average turnover of only about 50 million. Even Tencent, the "king of shares", has an average daily turnover of only seven or eight billion, equivalent to an average daily turnover rate of 3/1000. For the Hong Kong stock market as a whole, even if the daily turnover can exceed 200 billion, thankfully, if it exceeds 300 billion, it can burn high incense. Hong Kong stock is not so much a lake in the dry period as a small pond left by the lake drying up.

Global institutional investors will find that Hong Kong stocks are like vegetable leaves sandwiched in sandwiches compared with the two major capital markets, US stocks and Chinese A-shares.

Us stocks have the richest assets in the world, the deepest liquidity pool and the freest capital flow mechanism. As long as it is an investor with global asset allocation capacity, everyone needs to allocate a considerable number of US stocks.

Although A-share is a closed market, it relies on the huge liquidity of China's RMB, there are a large number of retail investors and more and more institutional investors. If120freespinshouseoffunIf you adapt to the rules of the A-share game, you will find that it can be self-consistent, and there are always some people who can be like a fish in water.

What is the unique value of the Hong Kong stock market for mainland investors? If investors' money can go abroad and allocate assets around the world, why not buy US stocks or Japanese or Indian stocks? If the money of investors can not leave the country, then it is only natural that A-shares can be the first choice, even if the general environment is general, you can still find a good concept sector such as AI. This creates a cycle: the more mainland investors are not interested in Hong Kong stocks, the worse the liquidity of Hong Kong stocks, which makes mainland investors even less interested in Hong Kong stocks.

I remember that around 2020, when Chinese invested heavily in Hong Kong and rented the most expensive office building in Central, many people optimistically estimated that even if US dollar capital was not so optimistic about Hong Kong, Chinese capital would be enough to take over the torch. support the liquidity and financing capacity of Hong Kong stocks. For example, in July 2022, the big foreign banks represented by Goldman Sachs even imagined that once all the US stocks were transferred to Hong Kong stocks, the trading volume of China Internet companies could increase significantly, and their valuations might also rise-looking back today, it's a fantasy!

At this moment, we can see that Chinese capital has indeed played a more and more important role in the Hong Kong stock market, but it is not enough. Even if there are still some unique and high-quality assets in the Hong Kong stock market, the valuations of these assets will inevitably be discounted in the face of a continuing liquidity shortage. However, even in this awkward state, there are still a large number of "unicorn" companies waiting in line to list Hong Kong shares. In addition to the new tea giants mentioned above, those who have submitted prospectuses include Lala, tick-tock, Little Red Book, byte jump, etc., which have been rumored for a long time but have not yet been handed in.

The only reason the above-mentioned "unicorns" are counting on the Hong Kong stock market is that it is not convenient for them to list US stocks and it is difficult for them to be allowed to list A shares. Since the second half of 2021, the path for Chinese Internet platform companies to list in the United States has been basically cut off. However, as mentioned above, the review mechanism for A-share listings is too strict, the listing process is too uncertain, and many industries have not been encouraged to list, which is not an obvious choice for most "unicorns". According to the present situation, if these companies choose Hong Kong stocks, their valuations will suffer certain losses, and there is even the possibility of repeating their destinies. But if there is another choice, who will choose Hong Kong stocks?.

There are only three possibilities for these "unicorns" to avoid a "bloody listing":

There has been a great improvement in liquidity and investor sentiment in the Hong Kong stock market, which may be driven by Hong Kong itself or from the outside (such as the support of the mainland and the improvement of the international environment).

The A-share market has relaxed its restrictions to be lenient to some "unicorns" of new consumption and new technology industries, just as Science and Technology Innovation Board welcomed "hard technology" companies, welcoming the arrival of these "unicorns"

The listing of Chinese stocks in the United States has returned to the state it was before 2021, the authorities have agreed on many issues, and the risk appetite of US investors for Chinese stocks has further increased.

There is no doubt that there are some obstacles in all three ways. In the current global macro situation, all problems are not isolated, but mixed together-you have me, I have you, cutting constantly, management is still messy, and there is no panacea to solve the problem quickly. It is because of this that many unicorns choose to go public with bloodshed, because it is better than not.

All in all, for most types of Chinese companies, Hong Kong stocks are only suitable for "auxiliary", not "C"; those who should "play C" are either A-share market or (before 2021) US stock market. Assistance is very important in any MOBA game, and sometimes it can even determine the outcome, but it is not the C position after all. Sometimes, we see that Cai Wenji, the national server, kills the opposite side thousands of miles with playing music, giving people the illusion that "the advantage is mine." but anyone who wants to rely on Cai Wenji to win a key regiment war will either lose in the end. or it's very hard to win.