Hong Kong-listed Alibaba shares jumped as much as 6% on Tuesday after the company said it would apply for a dual primary listing in Hong Kong.
Quang Da | Jiemian News | China Optical Group | Getty Images
Ali BabaHong Kong-listed shares jumped 6% on Tuesday after the Chinese tech giant said it would apply for an initial dual listing in Hong Kong, before paring some of the gains.
The tech giant’s shares are already traded on the US and Hong Kong stock exchanges, but the current listing in Hong Kong is secondary.
The initial listing process in Hong Kong is expected to be completed before the end of 2022, The company said in a press release.
The Hong Kong Stock Exchange recently changed the rules, making it easier for more companies to obtain primary double listings in the Chinese financial hub. Alibaba is said to be the first big company to take advantage of this rule change, According to Reuters.
“We have received approval from the Board of Directors to apply to add Hong Kong as another major location for the listing, with the hope of fostering a broader and more diversified investor base to participate in the growth and future of Alibaba, particularly from China and other markets in Asia,” said Daniel Zhang, Alibaba Group Chairman and President. Its executive director, according to the media statement.
Alibaba shares were up 5.52 percent in its latest trading.
Ronald Wan, non-executive chairman of Partners Fintech Holdings, said the move was “very strategic” because the Hong Kong market did not offer as much liquidity to Alibaba as the US market.
“We need something else, we need Stock Connect to bring in mainland investors to invest in stocks,” he told CNBC’s “Street Signs Asia” on Tuesday.
Having an initial listing in Hong Kong will allow Alibaba to list on the Shenzhen-Hong Kong Stock Connect, giving investors in mainland China access to the stock.
The January Chinese Renaissance Report noted that based on historical data, the turnover and velocity of companies with secondary listings in Hong Kong are significantly lower than those of ADRs in the United States.
ADRs are American Depository Receipts, which act as proxies for the shares of foreign companies listed in the United States
At the same time, Wan said that Ali Baba is preparing itself even with a The dispute between the United States and China over accounting issues continuous.
US and Chinese regulators are working to resolve an audit dispute that has threatened US-listed Chinese companies with delisting.
“If something goes wrong…Alibaba can shift its primary listing status back to Hong Kong while still enjoying reasonable liquidity in terms of stock trading,” he said.
“I think it will be a good transition for the company and its investors as well,” he added.
CNBC’s Evelyn Cheng contributed to this report.
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