HK, China bourses in bid to add dual-class shares in trading link

HONG KONG • The Hong Kong stock exchange said yesterday it has agreed to work with China's bourses towards the inclusion of dual-class shares in a cross-border trading link, marking a step towards resolving a dispute over the link.

Hong Kong Exchanges and Clearing (HKEX) said Hong Kong-listed dual-class shares will need to establish their trading stability during an initial period, after which they could be included in the so-called stock connect scheme, if other requirements are met.

HKEX also said it would set up a working group with the Shanghai and Shenzhen exchanges to formulate the specific programmes and rules for the inclusion of dual-class shares in the trading link.

A HKEX spokesman said no further details of the scheme were immediately available.

The announcement came after the two mainland stock exchanges said in a surprise move last Saturday that they would not expand the stock connect scheme with Hong Kong to foreign firms, so-called "stapled" securities, and companies with different voting right structures. The move was aimed at protecting less sophisticated investors from the complexities of such shares.

The ban was considered a blow to Hong Kong, which has been working to improve its ability to attract Chinese tech firms to list in the city.

HKEX said the three exchanges acknowledged that as mainland investors were not yet familiar with weighted voting rights companies, there was a need to consider the maturity and regulatory practices of the two markets.

Shares of Chinese smartphone maker Xiaomi Corp plunged on Monday after the weekend announcement, before recovering later in the day. It was the first firm to list in Hong Kong with weighted voting rights and investors had hoped that its inclusion in the Hang Seng Composite Index this month would help attract capital from the mainland. Xiaomi shares jumped more than 6 per cent yesterday.

On Monday, HKEX chief executive Charles Li said he was flying to Beijing to discuss the rule change with the mainland authorities. The stock connect scheme gives Chinese investors their only direct means of trading offshore stocks and international investors access to China's companies.


A version of this article appeared in the print edition of The Straits Times on July 19, 2018, with the headline 'HK, China bourses in bid to add dual-class shares in trading link'. Print Edition | Subscribe