Alibaba moves closer to home with Hong Kong dual-primary listing

Alibaba will apply for a dual primary listing on the Hong Kong Stock Exchange, which analysts say lays the groundwork for giving mainland China investors access to its shares and helping minimize disruption if U.S. regulators force it to pull itself off the wall withdraw Street.

The New York-listed Chinese e-commerce group, which has a secondary listing in Hong Kong, said its board has authorized management to apply for an initial listing on the Hong Kong stock exchange and the process is expected to be completed by the end of 2022.

A primary listing in Hong Kong is a requirement for dual-listed Chinese corporations to be admitted to the city’s Stock Connect program, which allows mainland Chinese investors to trade in a company’s shares. Inclusion can help improve a stock’s valuation and liquidity. A double primary listing means Alibaba subject to the full rules of the Hong Kong Stock Exchange as well as those of the New York Stock Exchange.

Hong Kong-listed shares of Alibaba ended up 4.8 percent higher on Tuesday. The Hang Seng Tech Index, which tracks the 30 largest tech companies listed in the area, rose 1.4 percent.

CEO Daniel Zhang said the company hopes to “grow a broader and more diversified investor base to participate in Alibaba’s growth and future, particularly from China and other markets in Asia.”

Analysts said the move is another step towards potential inclusion in the Connect program and could ease the transition to Hong Kong-only trading should US regulators force Alibaba and other Chinese companies to do so traded for delisting in New York.

“It’s a very smart move to meet the demands of the Chinese [securities regulator] Therefore, Alibaba can eventually be included in Stock Connect, and even if they are delisted in the US, they still have a backup plan,” said Dickie Wong, head of research at Kingston Securities.

US regulators have demanded that Chinese companies provide detailed audit reports or be banned from Wall Street. The Financial Times reported on Monday that Beijing was preparing a system to bring some Chinese groups into compliance with US regulations requiring public companies to allow regulators to see their audit records. Washington officials, however, are skeptical that Chinese companies will achieve full compliance.

Admission to the Stock Connect is also not guaranteed as much of the annual trading activity must take place in Hong Kong before a primary listing company can qualify.

In its announcement on Tuesday, Alibaba said there had been a “significant increase in transaction volume” in Hong Kong since its IPO Second listing at the end of 2019.

But it conceded that the average daily trading volume over the past six months in Hong Kong was about $700 million, while that for New York was about $3.2 billion. That left Hong Kong’s share at less than 20 percent of the total and far from qualifying for Stock Connect.

The push for a dual primary listing also came after the company announced that the management of Ant Group, its related payments and fintech platform, was no longer partnering with Alibaba, as part of Ant’s efforts to seek corporate leadership after a to revise government crackdowns.

Alibaba moves closer to home with Hong Kong dual-primary listing Source link Alibaba moves closer to home with Hong Kong dual-primary listing

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