Why Alibaba, Other Chinese Firms Could Seek Shifting Primary Listings to Hong Kong

Alibaba Group Holding Limited BABA and other U.S.-listed Chinese stocks could convert their secondary listings in Hong Kong to primary, Bloomberg reported on Wednesday, citing the bourse operator's chief executive.

What Happened:  Since dual-listed companies — especially ones with secondary listings in Hong Kong — are currently excluded from the "Stock Connect" scheme with China, it would serve as an incentive to explore primary listings instead, Hong Kong Exchanges and Clearing CEO Nicolas Aguzin said, according to the report.

The current exchange rule mandates that if more than 55% of the stock trading volume occurs in Hong Kong, then the company should transfer its listing status to primary. 

Alibaba and other secondary-listed companies are far from hitting the threshold, Bloomberg reported.

Bonnie Chan, head of listing with HKEX Group, said "I am seeing quite a clear trend that homecoming issuers are gravitating towards a dual primary listing as opposed to a secondary," Bloomberg reported.

Related Link:  Alibaba, Nio, EV Stocks Buck Broader Slide: What's Weighing On Hong Kong Markets Today 

Why It's Important:  One advantage companies may not want to lose out on is the exemption from some rules a secondary listing allows. Additionally, a secondary-listed company is not required to disclose certain matters such as financial guarantees to affiliates and stock pledges by controller shareholders.

Chan reportedly said companies could discuss with the Hong Kong stock exchange to continue to benefit from the exemption for some time to ensure a smooth transition.

Joining the stock connect program would help companies expand their investor base by including those from mainland China.

Chinese video platform Bilibili BILI recently received shareholder approval to move its primary listing to Hong Kong.

Photo via Ralf Liebhold on Shutterstock