Dalian Wanda Commercial Properties is officially leaving the Hong Kong Stock Exchange. It's not the first, and will not be the last. A growing number of Hong Kong-listed Chinese mainland companies are going private -- or considering doing so -- due to weak trading. Mao Dan reports.
A story which ends in less than two years. Dalian Wanda Commercial Properties is exiting the Hong Kong Stock Exchange (this month), after a long enough period of trading below its IPO price.
Bocom int'l managing director Hong Hao said, "The company's valuation in Hong Kong is been substantially under estimated. Plus, I think trading in Hong Kong in terms of the trading volume has been very low, especially after summer 2015, when the stock market crashed."
Parent company Dalian Wanda Group showed its determination with a buyout deal of 52.80 HK Dollars or 6.79 US Dollars per share, a 10% improvement on its initial offer. It also promised to relist its subsidiary in the Chinese mainland within the next two years.
"At 4.4 billion US Dollars, the Wanda Commercial's privatization is the largest in Hong Kong history. And we've seen a rising number of Chinese mainland companies choosing to leave the city, and return to the bourses in Shanghai and Shenzhen," said Mao Dan.
Since the beginning of this year, four Hong Kong-listed mainland companies, namely Wanda Commercial, Aupu Group, TCL Communication Technology and Peak Sport Products, have announced their plan to go private, citing slumping share prices.
Hong Hao said, "The Hong Kong market trading volume has been very thin. For a company that's trading here, if the market cannot support your re-financing needs, if the market can't trade on a daily basis to give you a fair valuation. I won't be surprised to see some of the companies want to be delisted from Hong Kong Market and go back to mainland."
These departures have left some market watchers questioning the future of the Hong Kong stock exchange.
Hong said, "I think the Hong Kong stock exchange is trying to make some change to the structure here. For example, we opened up the Connect program, we removed the quota, which I think is a very important structural change, even though probably the change will take some time to show."
And as companies pull out of the HKSE, and return to the bourses in the Chinese mainland, only time will tell what its impact will be like.
