Shares of Hong Kong-listed Alibaba jumped 6% on Tuesday after the company announced it would apply for a dual primary listing in Hong Kong.
Kuang Da | Jemian News | Visual Group China | Getty Images
Shares of Hong Kong-listed Alibaba jumped 6% on Tuesday after the Chinese tech giant said it would apply for a dual primary listing in Hong Kong, before paring some gains.
The tech giant’s shares are already traded on US and Hong Kong exchanges, but the current listing in Hong Kong is secondary.
The primary 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 its rules, making it easier for more companies to obtain a dual primary listing in the Chinese financial hub. Alibaba would be the first major company to take advantage of this rule change, according to Reuters.
“We have received board approval to seek the addition of Hong Kong as an alternate primary listing location, in hopes of fostering a broader and more diverse investor base to share in the growth and future of Alibaba, especially from China and other markets in Asia,” Alibaba Group Chairman and CEO Daniel Zhang said, according to the press release.
Alibaba shares last rose 5.52%.
The move is “very strategic” because the Hong Kong market hasn’t offered Alibaba as much liquidity as the US market, said Ronald Wan, non-executive chairman of Partners Fintech Holdings.
“We need something else, we need Stock Connect to get investors from the mainland to invest in stocks,” he told CNBC’s “Street Signs Asia” on Tuesday.
Having a primary listing in Hong Kong will allow 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 two main listings in Hong Kong and the United States, and both have been included in the stock connection program.
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 is much lower than that of ADRs in the United States.
ADRs are US certificates of deposit, which serve as a proxy for shares of foreign companies listed in the United States.
Meanwhile, Wan said Alibaba was preparing even as the US-China dispute over accounting issues continued.
US and Chinese regulators have been working to resolve an audit dispute that has threatened US-listed Chinese companies with delisting.
“In case something goes really wrong…Alibaba can transfer its primary listing status to Hong Kong and still enjoy reasonable liquidity in terms of stock trading,” he said.
“I think it will be a good decision for the company and for its investors as well,” he added.
– CNBC’s Evelyn Cheng contributed to this report.