Alibaba to apply for primary listing in Hong Kong to court China investors

This move could make its shares accessible by mainland Chinese investors via the city's links with Shanghai and Shenzhen. PHOTO: AFP

HONG KONG (BLOOMBERG) - Alibaba Group Holding will seek a primary listing in Hong Kong, entrenching the financial hub’s status as an alternative to US markets and paving the way for investors in China to directly buy shares of the country’s most prominent e-commerce company for the first time.

Alibaba said on Tuesday (July 26) it will apply to elevate its trading status in the Asian city, which will in turn allow it to seek inclusion in the Stock Connect link with the Shanghai and Shenzhen exchanges. That could boost liquidity after a year-long sell-off triggered by China’s economic slowdown and Beijing’s crackdown on its most powerful internet firms.

The move, expected by year-end, will grant hundreds of millions of investors in mainland China direct access to one of the country’s most storied names, which in 2014 made waves when it debuted in New York as the largest-ever initial public offering. 

Alibaba’s action could encourage peers to follow suit, helping cement Hong Kong as an alternative venue now that American regulators are threatening to toss Chinese companies off US bourses unless they comply with auditing rules. SoftBank Group, Alibaba’s largest shareholder, rose more than 3 per cent in Tokyo.

“This is a massive move for Alibaba, given it is the biggest secondary listing in Hong Kong,” said Forsyth Barr Asia analyst Willer Chen.

Inclusion in the Stock Connect “can lead to a more diversified investor base for Alibaba and let mainland investors have direct investment access to Alibaba via southbound trading", he said.

Alibaba has shed some two-thirds of its value since a 2020 peak, pummeled by a regulatory crackdown that sought to rein in anti-competitive behavior across the Internet sector.

It currently has a secondary listing on the Hong Kong bourse, but has seen a rise in public float and transaction volume on the exchange there, it said in a statement on Tuesday. Its average daily trading volume in Hong Kong was about US$700 million (S$970.5 million), compared with about US$3.2 billion in the United States.

Hong Kong Exchanges and Clearing chief executive Nicolas Aguzin has said more companies with secondary shares in Hong Kong are considering primary listings, while others may be forced to do so by market rules as more of their volume migrates to the city. 

The prospect of Stock Connect inclusion for companies like Alibaba has been subject of intense speculation among traders in Hong Kong, which currently excludes companies with both secondary listings and weighted voting rights from its mainland trading links.

While some market participants had hoped the exchange would relax the rules that bar such companies, a primary listing is emerging as an alternative path.

Bilibili this month won shareholder approval to convert its secondary Hong Kong listing status to dual-primary, while Zai Lab completed the procedure last month.

Unlike companies with a primary listing in Hong Kong, firms with a secondary listing in the city are exempted from certain rules and do not have to disclose things such as financial guarantees provided to affiliates and stock pledges made by the controlling shareholder.

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