Hong Kong Secondary Listings Present Arbitrage Opportunities

The wave of secondary listings in Hong Kong by Chinese firms seeking an escape from the potential of forced delistings from the U.S. is proving to be a great arbitrage trade.

For example, Yum China Holdings Inc. and Huazhu Group Ltd. have both priced their flotations at discounts to their U.S. share prices, giving hedge funds the opportunity to buy the Hong Kong offering while shorting the U.S. stock and profiting from the price difference.

Typically the discounts have been quite tight, averaging at 2.67% for the seven such listings that have made their way to Hong Kong since New York-traded Alibaba Group Holdings Ltd. pioneered the so-called “homecoming” listing last November.

Drug developer Zai Lab Ltd. is set to price its offering at the tightest discount of them all: just 1% to its closing price in New York on Monday. This was made possible by the slide in U.S. stocks overnight.

Zai Lab’s U.S. listed shares fell 7.53% on Monday while express delivery giant ZTO Express Cayman Ltd. slipped 6.46%. ZTO Express has priced its Hong Kong share sale at a 2% discount to its Monday closing price in New York, sources familiar with the matter said.

It was a similar story for Huazhu Group Ltd. The listing priced at a tight 2% discount last week. Huazhu’s shares in Hong Kong rose almost 5% on their debut on Tuesday, shrugging off a report from short seller Bonitas. Their last price of HK$310.8 translated to a tiny 0.9% discount to their Monday closing price of $40.48 in New York. The opportunity for that arbitrage has mostly gone.


  • Baozun
    • Hong Kong stock exchange
    • Size up to $536m
    • Pricing Sept. 23, listing Sept. 29
    • Citi, CMB International, Credit Suisse
  • JHBP (Genor Biopharma)
    • Hong Kong stock exchange
    • Pre-marketing Sep. 14-16
    • Goldman Sachs, JPMorgan, Jefferies
  • Everest Medicines
    • Hong Kong stock exchange
    • Size up to $400m
    • Pre-marketing from Sept. 21
    • Goldman Sachs, Bank of America
  • Joy Spreader Interactive Technology
    • Hong Kong stock exchange
    • Size $202m
    • Listing Sept. 23
    • China Securities, China Merchants Securities, BOCOM International
  • Ming Yuan Cloud
    • Hong Kong stock exchange
    • Size $797m
    • Listing Sept. 25
    • CICC, Citi
  • Zai Lab
    • Hong Kong stock exchange
    • Size $765m
    • Pricing Sept. 22, listing Sept. 28
    • JPM, Goldman Sachs, Citi
  • ZTO Express
    • Hong Kong stock exchange
    • Size $1.26b
    • Pricing Sept. 22, listing Sept. 29
    • Goldman Sachs
  • Neusoft Education
    • Hong Kong stock exchange
    • Size up to $134m
    • Pricing Sept. 22, listing Sept. 29
    • Citic Securities
  • Kioxia
    • Tokyo stock exchange
    • Size $2.9b
    • Pricing expected Sept. 28, listing Oct. 6
    • Morgan Stanley, Goldman Sachs, JPMorgan, Nomura, Bank of America
  • Big Hit Entertainment
    • South Korea exchange
    • Size up to $812m
    • IPO pricing on Sept. 28, subscription from Oct. 5-6
    • NH Investment, Korea Investment, JPMorgan
  • Gland Pharmacy Ltd.
    • India stock exchanges
    • Filed July 10
    • Citi, Haitong, Nomura, Kotak
  • Computer Age Management Services

    • BSE
    • Size up to $304m
    • Offer period from Sept. 21-23
    • Nomura, Kotak Mahindra, HDFC, ICICI

More ECM transactions we are following:

  • The share sale by a unit of Thailand’s oldest conglomerate is set to test investors’ interest in Southeast Asia’s second-largest economy, as SCG Packaging Pcl rolls out its long-delayed initial public offering.
  • Drug developer Zai Lab Ltd. is telling prospective investors it plans to price its second listing in Hong Kong at HK$562 ($72.52) per share, putting it on track to raise about HK$5.9 billion, according to people familiar with the matter.

See also:

  • Asia ECM Weekly Agenda
  • IPO data
  • U.S. ECM Watch
  • EU ECM Watch
  • To receive the ECM Watch in your inbox daily, click the “subscribe” button at the top of this article.

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