HKEX: High valuations not ‘primary driver’ for tech firms in Hong Kong

Tech darlings such as Chinese mobile phone maker Xiaomi might have seen weak investor interest in Hong Kong lately, however they don’t appear be motivated by high stock valuations anyway, said Charles Li, the CEO of Hong Kong Exchanges as well as also Clearing (HKEX).

Many of these rising companies are cash rich as well as also maintaining top positions in their respective industries is usually more important to them, Li told CNBC at the entire world Economic Forum on Wednesday.

“They do seem to have strong confidence in their underlying … businesses,” Li said. “A lot of these major competitive completely new economy spaces, you definitely need to be number one, number two, at worst number three, to survive. as well as also so maintaining that will leadership position is usually very important.”

Still, he sees such companies heading for public listing despite the market “not pricing them at the top.”

“So whether capital markets give you a great valuation or not, seems to be not necessarily the primary driver of a lot of those listings,” he added.

Hong Kong has seen a pickup in interest for listings following a market rally early This particular year as well as also after the exchange introduced completely new rules designed to attract tech companies by allowing dual-class share structures.

however the benchmark Hang Seng index has fallen about 18 percent since its January peak amid U.S.-China trade tensions, as well as also several recent listings — such as Xiaomi’s — have dropped below their IPO prices.

Xiaomi had a disappointing initial public offering in Hong Kong in July. Experts had said the idea could be a reflection of lackluster investor interest for “completely new economy” type of Chinese companies, as well as disappointing valuations inside the East Asian finance hub.

Sentiment surrounding Chinese companies with global ambitions has also been hurt by the escalating U.S.-China trade tensions, they say.

Among the Chinese tech companies seeking to file (or that will have already filed) IPOs in Hong Kong This particular year are: Meituan Dianping, an online platform with services coming from food delivery to ticketing; Bitmain, bitcoin mining equipment maker; as well as also Maoyan Weying, Chinese movie ticketing platform.

however Li stressed that will the up as well as also coming companies are not that will affected by “marginal” market movements. Rather, those who are not listing have various other business considerations, such as regulatory concerns or various other strategic factors.

“Those who do choose to come, deeper conversations with them give me strong confidence that will the market seems to be secondary … in driving their decisions on timing,” he reiterated. “People don’t seem to be bothered by the fact that will they are not raising as much money as they can.”

“These companies are definitely major rising stories. This particular incremental capital … the marginal up as well as also down, does not definitely impact that will much.”

— CNBC’s Kelly Olsen as well as also Reuters contributed to This particular article.

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