(Yicai Global) Feb. 13 -- Chinese e-commerce giant Alibaba Group Holding, which had a secondary listing in Hong Kong in late November, will not be granted entry to the Hong Kong Stock Connect scheme, dashing the hopes of legions of mainland investors hoping to trade the stock.
Valued at HKD4.6 trillion (USD592 billion) on the Hong Kong market, Alibaba [HKG:9988] cannot be included in the equity program that links the Asian financial hub with Chinese investors at present, Bloomberg News reported yesterday, citing unidentified people with knowledge of the matter. The list of eligible stocks is due to be updated on Feb. 17.
Companies with weighted voting rights, which gives different classes of shares different voting rights, and a secondary listing in Hong Kong are not entitled to be included in the trading link, a foreign investment banker told Yicai Global. The policy is expected to remain in place for some time.
Alibaba's USD13 billion listing in Hong Kong was the biggest the special administrative region had seen in almost a decade. Today, its shares rose 1 percent to close at CNY217.20 (USD31.11) each. They have gained 23 percent on their issue price of HKD176.
The Hangzhou-based company, whose main listing [NYSE:BABA] is in New York, is subject to the supervision of the New York stock market. As such, its listing reviews and information disclosure will be significantly different than other firms in the stock connect program, experts said. For example, Alibaba will follow generally accepted US accounting practices, which are very different from auditing standards in China and not easy for mainland investors to understand.
The move will be a big blow to Hong Kong's aspirations to position itself as an overseas listing with a channel to access mainland investors' cash. The Hong Kong Stock Exchange has proposed changes to the China Securities Regulatory Commission and is awaiting a response. Alibaba declined to comment yesterday.
But there is evidence that the rules are beginning to relax slightly. Last year for the first time, China green-lit smartphone maker Xiaomi and food delivery giant Meituan Dianping, both mainland firms with a primary listing in Hong Kong and weighted voting rights, for entry into the smart connect program. The two companies have gained from the resulting injection of mainland funds.
Editor: Kim Taylor