July 27, 2022: -On Tuesday, Alibaba’s Hong Kong-listed stock increased almost 6.5% after Alibaba expressed it would involve for a dual primary listing in Hong Kong before reducing some gains. The stock completed 4.82% higher by the trading day ends.
The tech giant’s shares are already traded on both U.S. and Hong Kong exchanges, but the recent listing in Hong Kong is a secondary one.
The company said in a press release that the primary listing process in Hong Kong is expected to be completed before 2022 ends.
The Hong Kong Exchange just revised rules, making it more comfortable for more companies to get dual primary listings in the Chinese financial hub. According to Reuters, Alibaba is the foremost large company to take advantage of this rule change.
“We have received approval from the Board to apply to add Hong Kong as another primary listing venue in the hopes of fostering a wider and more diversified investor base to share in Alibaba’s growth and future, especially from China and different markets in Asia,” Alibaba Group Chairman and Chief Executive Officer Daniel Zhang said, according to the media.
The move is “very strategic” because the Hong Kong market has not offered as much liquidity to Alibaba as the U.S. market, said Ronald Wan, non-executive chairman of Partners Fintech Holdings.
“We need something else; we need Stock Connect to get in mainland investors to invest in the stocks,” he told on Tuesday.
A primary listing in Hong Kong will permit Alibaba to be included in the Shenzhen-Hong Kong Stock Connect, which gives investors in mainland China access to the stock.
Chinese electric vehicle makers Xpeng and Li Auto have dual primary listings in Hong Kong and the U.S. and have lived included in the stock connect scheme.
A China Renaissance report from January noted that, based on historical data, the turnover and velocity of companies with a secondary listing in Hong Kong are much lower than that for ADRs in the U.S.
ADRs are American depositary receipts, which serve as proxies for shares of foreign companies that list in the U.S.
At the same time, Wan said Alibaba is training itself even as the U.S.-China dispute over accounting issues persists.
The U.S. and Chinese controllers have been working to resolve an audit dispute that has threatened U.S.-listed Chinese companies with delisting.
“In case something goes wrong, Alibaba can shift its primary listing status to Hong Kong and still enjoy a reasonable liquidity in stock trading,” he said.
“I think it will be a good move for the company and its investors as well,” he added.