Chinese AI supply chain firms will stay resilient in Hong Kong despite valuation concerns, Citi said. Simon Yuen noted that local liquidity and global demand support these listings. "If the whole AI cycle turns in the US, you will see an impact everywhere," he warned. Next year, focus shifts toward profitability.
Synopsis
As anxiety over valuations rises, Chinese AI supply chain firms are set to remain resilient in the marketplace. Ongoing listings in Hong Kong are supported by high domestic and global demand, with capital influx from mainland China being vital. In the upcoming year, attention will pivot to AI model developers that exhibit robust profitability. Remarkably, there has been a notable surge in public offerings within equity capital markets this year.
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Listings of Chinese AI supply chain companies are expected to stand their ground weathering rising valuation concerns and increasingly sharper scrutiny, a Citi banker working with Chinese companies said.
Despite recent valuation pullbacks on data centre companies, largely originating from the US market, future AI supply-chain listings would continue in Hong Kong, said Simon Yuen, Citi's head of China investment banking.
Chinese companies plan to list in Hong Kong are cushioned by a roughly even split between domestic Chinese and international demand, Yuen, who also heads Citi's financial institutions group in APAC, said on the sidelines of the IMF meetings in Bangkok.
The market is supported by a pool of local liquidity, with rising southbound capital from the Chinese mainland emerging as a key buying force, Yuen said.
Still, "if the whole AI cycle turns in the US - and we have seen some volatility in the last few weeks - you will see an impact everywhere, Hong Kong included," he warned.
Many Chinese hardware players have proactively established manufacturing footprints outside mainland China, he said, which helps them better service global clients and mitigate geopolitical friction.
Chinese hardware suppliers have benefited from the global AI infrastructure boom, gaining both sales volume growth and higher unit prices, Yuen said.
Next year, the focus in Hong Kong's equity capital markets is expected to shift away from pure hardware, toward Chinese artificial intelligence models and application developers, he said.
"But these companies need to have a proven business model. They need to show very strong growth and profitability," he said.
Propelled by Chinese tech funding demand, 118 firms went public in Hong Kong in the first nine months of the year, raising HK$388 billion ($49.4 billion), up 106% year-on-year.
($1 = 7.8479 Hong Kong dollars)
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