The Hong Kong Stock Exchange ("HKSE") has recently issued an update on HKSE's efforts to develop sustainable markets for RMB products. A significant development is the ability of existing listed issuers to make a "RMB follow-on offering". This allows for raising of funds in RMB via placement, rights issue/open offer, public offer, or a combination of the above using similar fund raising methods allowed under the existing Hong Kong listing rules.
This latest development, together with the ability of companies to raise RMB through an IPO provides Hong Kong with a leading edge in raising offshore RMB. It is anticipated that there will be higher levels of investor appetite and enthusiasm for this type of product.
Cayman, Bermuda, BVI, Jersey, Isle of Man and Guernsey companies are all acceptable jurisdictions for listing on the HKSE. They can all benefit from this development either by way of a RMB IPO or where the company is already listed by way of a follow up offering of RMB traded shares. A RMB follow-on offering will mean the same issuer can maintain RMB traded shares together with HKD traded shares. Both RMB traded shares and HKD traded shares will be the same class of shares. All shareholders are treated equally. The only difference is that the shares will be traded under two separate counters on the HKSE in their respective currencies (ie. one in RMB and one in HKD). While the new shares subscribed in RMB will be traded over the RMB counter, the existing HKD traded shares will continue to be traded on the existing HKD counter.
It is intended by HKSE that there will be transferability between HKD traded shares and RMB traded shares. This transferability will ensure the efficiency of arbitrage and thereby maintain the prices of the two counters reflecting closely the actual exchange rates. However, since we are still at the early stage of development of RMB equities in Hong Kong, HKSE explains that there may be a need to have a short period of nontransferability for the first few RMB IPOs or RMB follow-on offerings. HKSE will retain flexibility on this matter and will work with prospective issuers who are interested in dual counter fund raising to find an optimal solution on transferability during the IPO process.
This is another landmark in the further internationalisation of RMB and Hong Kong's position as the preeminent offshore RMB settlement centre.
Appleby is the only offshore law firm to cover all of the offshore jurisdictions approved by the HKSE (Cayman Islands, Bermuda, BVI, Jersey, Isle of Man and Guernsey). With our wealth of experience in corporate finance, multi-lingual team and long standing presence in Asia, we are able to offer our clients outstanding offshore guidance for their listing needs.
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