HKEX CEO sees China giants moving to primary Hong Kong listing

HONG KONG (BLOOMBERG) – Hong Kong is likely to see more dual-traded companies shift towards primary listings in the financial hub as they seek inclusion in trading links with mainland China, according to the city’s exchange chief.

In a wide-ranging interview, Hong Kong Exchanges and Clearing (HKEX) chief executive officer Nicolas Aguzin 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 trading volume migrates to the city.

The most prominent dual-listed company currently excluded from the Stock Connect scheme with China is e-commerce giant Alibaba Group Holding.

“What we have seen, for example, in Alibaba and in a few others, is that over time, a lot of the trading is coming to our part of the world,” Mr Aguzin said. “When it is over 55 per cent trading in our market, at that point, they don’t have an option. But they can decide to do it any time.”

Mr Aguzin did not indicate whether Alibaba has held talks with HKEX about a potential primary listing. Alibaba did not immediately respond to a request seeking comment. Shares of the Chinese tech giant gained as much as 3.3 per cent in early Wednesday trade to the highest since February.

The prospect of Stock Connect inclusion for companies like Alibaba has been the 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 last week won shareholder approval to convert its secondary Hong Kong listing status to dual-primary, while Zai Lab completed the procedure in June.

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

Under current rules, a company will be required to convert its listing status to primary if 55 per cent or more of the trading volume takes place on the Hong Kong bourse over the past fiscal year. Still, most secondary-listed firms, including Alibaba, are far from reaching that threshold, according to data compiled by Bloomberg.

“I am seeing quite a clear trend that homecoming issuers are gravitating towards a dual primary listing as opposed to a secondary,” said HKEX head of listing Bonnie Chan during the interview. Companies seeking to convert can also discuss with HKEX on continuing exemption for some time to help with smooth transition, she said.

Mr Aguzin also expressed confidence that more connectivity with the mainland will boost trading volume and lift the exchange’s prospects. HKEX shares have lost 18 per cent since he took over in May 2021.