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Baozun, Zai Lab join march of New York-listed companies to raise more capital in Hong Kong as US-China ties deteriorate

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Two New York-listed Chinese companies filed plans to raise more funds in Hong Kong this week, joining a steady march of secondary listings as they seek to bolster their finances closer to home to hedge against risks amid deteriorating US-China relations.

E-commerce operator Baozun and pharmaceutical producer Zai Lab Limited, both headquartered in Shanghai, will sell additional shares on the Hong Kong stock exchange, adding to the US$4 billion of initial public offerings (IPOs) this month that make September the busiest month for the bourse since hosting a record 24 listings in July.

Baozun, 14 per cent owned by this newspaper's owner Alibaba Group Holding, will kick off its sale on Friday of 4 million shares to Hong Kong investors, out of a global offering of 40 million shares, according to a term sheet. The company is seeking to raise about US$500 million, according to earlier media reports. Zai Lab is aiming to raise US$832 million through the sale of 771,000 shares at HK$648 (US$83.61) per share to local investors, with another 9.79 million shares to international investors..

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The two Chinese companies joined the march that began with Alibaba's US$13 billion secondary listing in Hong Kong last November, the first such stock offer on the city's bourse. That was followed in quick order by NetEase, JD. Com and Yum China Holdings, which together raised US$10 billion to help Hong Kong catch up with New York as the worlds favourite IPO destination this year.

These secondary listings followed threats by US politicians to expel Chinese companies from Wall Street amid a bruising trade war and the worst bilateral ties between the two nations in decades. The US State Department had instructed American colleges and universities to divest their holdings in Chinese companies, warning of the potential for "wholesale delisting."

JD.com and NetEase raised $7.5 billion together in June, according to data from Refinitiv. This week's US$4 billion in IPO proceeds make up over half of what Chinese companies raised on the two US exchanges for the first nine months of this year.

Source: Refinitiv. SCMP Graphics alt=Source: Refinitiv. SCMP Graphics

Others that have also launched their IPOs include delivery firm ZTO Express, which kicked off its Hong Kong offering on September 16to raise up to US$1.6 billion, while Shanghai's Huazhu Group wrapped up its US$782 million IPO on the same day. Shenzhen-based property technology company Ming Yuan Cloud is seeking to raise up to US$797 million, which is expected to close on Friday.

Baozun, 10.6 per cent owned by Softbank, plans to use the proceeds raised for expanding its network of brand merchant partners, invest in technology and enhance digital marketing. Its first-half net profit rose 22 per cent to 122.73 million yuan (US$18.12), from 100.62 million yuan a year ago.

Baozun's IPO has an overallotment option for underwriters to sell up to 6 million more shares to meet strong investors' demand. Citi, CMB International and Credit Suisse are joint sponsors of the deal, according to a preliminary filing to the Hong Kong stock exchange. The final offer price will be determined on September 23, while listing is scheduled on the main board on September 29.

Zai Lab's global offering involves 10.56 million shares, with the Hong Kong sale making up 7.3 per cent of the total. Underwriters including JPMorgan, Goldman Sachs and Citi may exercise their overallotment option known as greenshoe to sell another 1.58 million shares if the demand overwhelms supply. Listing on the mainboard is scheduled for September 28.

Zai Lab said two of its 16 product portfolio of drugs have already been commercialised in China, Hong Kong and Macau. Zai Lab's first-half net loss widened 54.4 per cent to US$128.62 million from US$83.27 million a year ago.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.