Shanghai-based data centre services provider GDS Holdings views Hong Kong as a hub for the Southeast Asia region, its chief financial officer said.
The company, which hosts some of the largest cloud services providers in mainland China, including AliCloud and Tencent Cloud, is listed on the Nasdaq. It has also raised HK$12.9 billion (US$1.6 billion) from a secondary listing in Hong Kong, where it sold 160 million shares at HK$80.88 each. Its stock debuted on Monday and rose 2.6 per cent to HK$83.
GDS, also known as Global Data Solutions, is the latest US-listed Chinese company to raise funds in Hong Kong amid rising threats by the United States to decouple its economy from China.
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Since Alibaba Group Holding’s secondary listing last November, at least 10 other Chinese companies have taken the same route for additional capital this year. JD.com and NetEase, the largest companies with secondary listings in Hong Kong, cumulatively raised more than US$15.4 billion in proceeds, according to data from Refinitiv.
Given the political developments in the US, it’s important for all of our shareholders that we have a secondary listing in Hong Kong, which ensures that there will be a liquid market for our shares in the long term
The US-China situation was accelerating a digital transformation in China, Hong Kong and the Southeast Asian region, said Daniel Newman, GDS’s chief financial officer, said in an interview.
“Given the political developments in the US, it’s important for all of our shareholders that we have a secondary listing in Hong Kong, which ensures that there will be a liquid market for our shares in the long term,” said Newman.
Alibaba and Tencent, China’s top two cloud services providers and internet companies, are among GDS’s largest customers, occupying about 55 per cent of its total net floor area of 266,260 square metres (2.9 million square feet) as of the end of June.
The company is the mainland’s largest “carrier neutral” data-centre services provider – its services are not tied to any telecoms network operator or internet service provider – with a 21.9 per cent market share in 2019 in revenue terms, according to iResearch.
Singapore Technologies Telemedia, a unit of Singaporean sovereign fund Temasek Holdings, has a controlling 34 per cent stake in GDS, while private-equity manager Hillhouse Capital owns about a 4 per cent stake.
“Hong Kong is a big market for our customers, but it’s also a great place as a platform to serve the region, because of all the submarine cable connectivity here,” Newman said.
The city is linked with 11 external submarine optical fibre cable systems, as well as 20 overland fibre-optic cables and 11 communications satellites, according to the Commerce and Economic Development Bureau (CEDB).
“Our strategy is to be a partner to the largest cloud, internet companies and financial institutions in China, fulfilling their requirements for IT infrastructure wherever they are deploying,” he said, adding that these companies might deploy in some markets in Southeast Asia in the future.
The Covid-19 pandemic has accelerated online adoption by individuals and digitalisation by enterprises, and data centres have been a beneficiary, Tam Tsz-wang, a Hong Kong and mainland China telecoms and technology analyst at DBS Bank, said in a report on October 20.
The bank said it expects demand for data centres in Hong Kong to grow by 15 per cent annually in the next three to five years, driven by increasing use of online services. Moreover, the city will act as a gateway for Chinese internet and multimedia content providers, as well as telecoms operators, Tam added.
GDS’s American depositary shares last traded at US$84.04 on Friday. Each ADS represents eight ordinary shares. For the six months ended June, the company recorded a net loss of 193.1 million yuan (US$28.9 million), according to its prospectus. It incurred a loss of 442.1 million yuan last year, while its debt stood at 21.9 billion yuan as of August 31, 2020.
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