Hello! Welcome to this edition of CBN Perspective. I’m Stephanie Li.

China’s new energy battery bigwig Contemporary Amperex Technology Limited (CATL) has made headlines again – this time for its USD4.6 billion debut on the Hong Kong stock exchange, the world’s largest initial public offering this year.

CATL’s shares surged as much as 18% on its debut, a signal of both investor confidence and the company’s carefully orchestrated industrial dominance. CATL commands 38% of the global electric vehicle battery market, comfortably ahead of rivals BYD and LG Energy Solution. That kind of dominance doesn’t happen by accident. CATL has cultivated long-term relationships with industry titans such as Tesla, BMW and Volkswagen.

But CATL is perceived by the market as a company that is not short on funds. According to the latest financial report, as of the end of the third quarter of 2024, CATL held 264.7 billion yuan in cash on its balance sheet. Its HKD35.3-billion IPO is only a tiny fraction of its HKD1.4 trillion market cap. So why Hong Kong for a secondary listing? 

Founded in 2011, CATL was listed on Shenzhen Stock Exchange’s ChiNext market in 2018. Last year, the group’s net profit reached 50.75 billion yuan — a year-on-year increase of 15% — with dividends exceeding a whopping 25 billion yuan, not much less than the amount raised from the Hong Kong IPO.

In reality, CATL’s listing in Hong Kong is more about serving its overseas expansion strategy. At its previous roadshows, the company repeatedly mentioned that the purpose of the IPO fundraising is to actively expand its overseas business, with 90% of the funds intended for the construction of its Hungarian plant. The new factory is expected to become the largest EV battery factory in Europe upon completion.

In its annual report released in March this year, CATL also stated that the company is at a critical stage of rapid overseas expansion and layout. The Thuringia plant in Germany is currently ramping up production capacity, while the Hungarian plant, the joint venture plant in Spain with Stellantis and the Indonesian battery industry chain project are still under construction or in the planning stages — all of which require significant overseas funding.

This deep integration gives CATL a unique position within the EV ecosystem. Its clients are not merely customers; they are co-investors in CATL’s future. This translates into greater security of demand, faster deployment of new battery chemistries and an expanding global footprint. In an industry where scale and speed are decisive, CATL checks both boxes, and then some.

“CATL is not just a battery component manufacturer; we are a system solution provider and are committed to becoming a zero-carbon technology company,” said Chairman Zeng Yuqun at the listing ceremony.

He stressed that the global zero-carbon transportation market is a trillion-dollar opportunity poised for explosive growth, in light of which CATL is promoting the integration of the transportation and energy grids.

BloombergNEF predicts that annual investment in electric transportation must reach USD3 trillion by 2030. CATL has built the world's most advanced and diversified product portfolio to respond to this revolution.

In terms of power grids resilience, CATL is channelling resources into zero-carbon grid technologies, including power electronics, flexible regulation systems, and virtual power plants.

It also aims for all factories to be carbon-neutral this year and is helping to decarbonize traditional industries such as steel, cement, and chemicals. The International Energy Agency(IEA) predicts that starting in 2030, achieving net-zero emissions will require USD4.5 trillion in annual global investment.

Trekking deeper in its foray to expand worldwide, CATL’s the move is of strategic importance to get it connected with global financial markets.

And CATL is not the only company that chose “A+H” dual listings on both the A-share and Hong Kong markets.

Several A-share companies in the lithium battery and photovoltaic sectors — such as Wuxi Lead Intelligent, CNGR Advanced Material, Shenzhen Senior Technology Material, Zhejiang Narada Power Source and Hainan Drinda New Energy Technology — have all announced plans to list in Hong Kong. 

The biggest three IPOs so far this year, besides CATL, included China’s biggest bubble tea chain Mixue Ice Cream & Tea and top biopharma company Jiangsu Hengrui Pharmaceuticals.

This Wednesday, five mainland companies, including Muyuan Foods, BASiC Semiconductor, FS.com, Shanghai Seer and Worldwide Logistics, have filed preliminary listing applications with the HKEX to raise capital, joining the flurry of Chinese start-ups that have pushed the city to the top of the global ranking for IPOs. 

In April 2024, Chinese mainland securities regulator rolled out five measures to bolster capital market ties with Hong Kong, including encouraging leading mainland firms to list in Hong Kong. In October 2024, Hong Kong’s Securities and Futures Commission (SFC) and the HKEX announced fast-track approvals for eligible A-share applicants. 

“‘Formidable’ clusters of companies are set to tap Hong Kong’s IPO, as IPOs in the city have raised around USD10 billion this year and there were more than 150 companies in the pipeline, including many USD1-billion-plus jumbo deals,” HKEX CEO Bonnie Chan Yiting said on Wednesday.

The three clusters were mainland Chinese A-share firms, US-listed Chinese firms and specialist companies, she added.

As a growing number of US-listed China concept stocks are proactively returning to list closer to home to circumvent geopolitical risks and the potential threat of delisting, Hong Kong’s IPO market is poised to further invigorate.

On May 7, China Securities Regulatory Commission Chairman Wu Qing said that they will safeguard the legitimate interests of Chinese companies listed overseas, and create conditions to support the return of high-quality US-listed Chinese firms to the A-share market and the Hong Kong market.

Beyond their financial triumph, mainland firms listing in Hong Kong is a strategic maneuver in a rapidly changing geopolitical and industrial landscape.

They, in fact, signaled a clear intention: to distance itself from mounting US regulatory pressure while deepening financial ties with more receptive markets across Asia, the Middle East and Europe.

With Washington increasing scrutiny over Chinese tech firms, particularly those involved in energy and critical infrastructure, raising capital in New York has become more political than financial.

For them, it’s not just about raising money – it’s about charting a path of financial independence and resilience in a world of fragmented alliances.

Still, embracing big mainland IPOs amid China-US competition presents both opportunities and challenges for the international financial hub.

CATL issued its shares through a “Regulation S” offering, meaning the securities were not offered to investors within the US, thus bypassing the need to register with the US Securities and Exchange Commission. While this helps circumvent US regulatory scrutiny and potential political risks, it also limits the participation of US institutions.

Given that the Hong Kong stock market is already smaller than the US market, market participants worry that if trade tensions between China and the US spill over to affect more stocks, further restricting US investment will inevitably reduce the overall capital supply to the Hong Kong market, leading to an oversupply of shares.

Lawrence Lau, Greater China Financial Accounting Advisory Services Leader at Ernst & Young, as pointing out that insufficient trading activity for some stocks and even a short-term oversupply situation could result from a large-scale influx of newly listed companies to the Hong Kong stock market without a corresponding significant increase in market funds, impacting company valuations and share price performance.

In the long run, the key to whether Hong Kong stocks can continue to attract and accommodate more heavyweights such as “King Ning” and “King Snow” lies in whether it can maintain sufficient capital inflows.

Executive Editor: Sonia YU

Editor: LI Yanxia

Host: Stephanie LI

Writer: Stephanie LI

Sound Editor: Stephanie LI

Graphic Designer: ZHENG Wenjing, LIAO Yuanni

Produced by 21st Century Business Herald Dept. of Overseas News.

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