{"text":[[{"start":7.7,"text":"A glut of Chinese AI companies raising equity in Hong Kong is contributing to the stock market’s lacklustre performance, with investors warning that initial public offerings are pulling cash out of established names."}],[{"start":20.84,"text":"While equity issuance in the Asian financial hub has surpassed last year’s total — helped by a bumper crop of AI listings and follow-on offerings — the benchmark Hang Seng index has declined close to 3 per cent."}],[{"start":34.18,"text":"The disparity between equity issuance and overall market performance highlights weak global demand for Chinese stocks, even as those companies face growing pressure to raise capital and expand overseas."}],[{"start":46.58,"text":"Most global fund managers remain neutral or underweight on Chinese equities, meaning any new companies coming to market are competing with existing positions in investors’ portfolios."}],[{"start":57.2,"text":"“Hong Kong’s market has enough turnover to process a busy IPO calendar, but new deals are competing directly with existing China exposure inside portfolios,” said Sat Duhra, an Asia ex-Japan portfolio manager at Janus Henderson Investors."}],[{"start":72.6,"text":"For many Chinese companies, issuing equity in Hong Kong is one of their only funding options as credit growth has slowed in the mainland."}],[{"start":80.52,"text":"“Right now banks are not lending money,” said Hao Hong, chief investment officer at Hong Kong hedge fund Lotus Asset Management. “All the companies need money and the government thinks the market is a better vehicle.”"}],[{"start":91.72,"text":"However, China’s securities regulator has been selective about the types of companies that can list in the mainland to preserve liquidity, said fund managers and analysts."}],[{"start":101.92,"text":"“Regulators are trying to stabilise [mainland market] sentiment, and large equity issuance onshore can work against that objective,” said Duhra. “Hong Kong allows Chinese companies to raise capital without drawing directly on domestic liquidity.”"}],[{"start":null,"text":"
"}],[{"start":115.6,"text":"There are signs that the listings glut has slowed down the market. In the first half of the year, shares of newly listed Chinese AI start-ups such as Z.AI and MiniMax rallied sharply."}],[{"start":126.92,"text":"But more than half of the companies that listed in Hong Kong in the third quarter have seen their share prices fall, tracking a global tech sell-off in July as investors soured on AI."}],[{"start":136.42,"text":"“The IPO market became a bit of a momentum trade,” said Nicholas Chui, a portfolio manager at Franklin Templeton. “Anything that came into the market in the first quarter or the second quarter, people just said it was free money . . . That has largely evaporated.”"}],[{"start":152.06,"text":"Global tech stocks took a further hit on Monday after the biggest AI companies called for a slowdown in the technology’s development in response to warnings over its safety. China’s spy agency also warned of the risks AI could pose to the country’s political and social stability."}],[{"start":168.82,"text":"Tilly Zhang, a technology and industrial policy analyst at Gavekal Dragonomics in Beijing, was sceptical that the recent uptick in warnings would signal an end to Hong Kong’s fundraising frenzy."}],[{"start":180.68,"text":"“Both for the US and for China they are stuck in this competition,” said Zhang. “Nobody wants to take the cost of losing in this critical tech competition. More people can talk about it and make more rules about it, but they will definitely not slow down on AI advancement.”"}],[{"start":196.92,"text":"Many of the newly public companies are not profitable and work in areas such as biotech and semiconductors. The number of lossmaking groups, based on trailing 12-month net profit, has been rising this year."}],[{"start":208.88,"text":"“If you are listing with negative free cash flow with a muddled path to profitability you’re going to struggle to perform post-listing,” said Aadil Ebrahim, head of equities at Klay Capital in Singapore."}],[{"start":220.12,"text":"Hong Kong’s woes have been compounded by mainland China having more listed hardware companies that are supplying the AI infrastructure build-out."}],[{"start":228.24,"text":"After surging to a record last year, mainland Chinese investment in Hong Kong has “really fallen away”, said John Woods, chief investment officer for Asia at Lombard Odier. “On a relative attraction level, Hong Kong is losing out to more AI-oriented thematics on the mainland.”"}],[{"start":245.2,"text":"Some of the main Hang Seng benchmark’s largest constituents are legacy consumer tech companies that have sold off heavily this year. Tencent, Alibaba, Xiaomi and Meituan account for more than 20 per cent of the index and are among the most exposed to a slowdown in Chinese consumer sentiment."}],[{"start":261.56,"text":"Meanwhile, some of Hong Kong’s top-performing stocks this year are from the AI industry but were not in the Hang Seng Tech index for most of the year. The index provider added Z.AI and MiniMax to the tech composite in June, but some investors said the moves were too late."}],[{"start":279.22,"text":"“Whenever they do this it tends to be the peak of that specific industry,” said Hong of Lotus Asset Management."}],[{"start":287.04,"text":"“In 2021, they worked overtime to push out the Hang Seng Tech index to include all the internet names, and that was precisely the peak of the Chinese internet companies,” he added. “Whoever is presiding over this construction of the Hang Seng Tech index is seriously lagging.”"}],[{"start":304.32,"text":"Hang Seng Indexes Company said: “The Hang Seng index closely tracks the Hong Kong stock market and reflects its overall performance and market composition.”"}],[{"start":314.68,"text":"It added: “While AI-related companies have become increasingly prominent globally, their impact on the overall Hong Kong stock market is limited due to their relatively small share of total market capitalisation.”"}],[{"start":315.18,"text":"Data visualisation by Haohsiang Ko in Hong Kong"}],[{"start":332.97,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1789464203_1477.mp3"}