China AI supply-chain IPOs hold firm despite valuation pullback, Citi says

(Corrects spelling of Simon Yuan’s surname throughout)

By Selena Li

Bangkok, Oct 17 (Reuters) - 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 Yuan, 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, Yuan, 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, Yuan 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, Yuan 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)