Alibaba to apply for dual primary listing in Hong Kong, shares rise

Alibaba’s Hong Kong-listed shares jumped 6% on Tuesday after the company said it would apply for a dual primary listing in Hong Kong.

Quang Da | Jiemian News | Visual Chinese group | Getty Images

AlibabaHong Kong shares jumped 6% on Tuesday after the Chinese tech giant said it would apply for a dual primary listing in Hong Kong before cutting growth slightly.

The tech giant’s shares are already listed on the US and Hong Kong exchanges, but the current listing in Hong Kong is a minor one.

The initial listing process in Hong Kong is expected to be completed before the end of 2022. the company said in a statement.

The Hong Kong exchange recently changed the rules, making it easier for more companies to get dual primary listings in the Chinese financial center. Alibaba is reportedly the first major company to take advantage of this rule change. according to Reuters.

“We have been approved by the Board of Directors to apply to add Hong Kong as another primary listing site in the hope of creating a broader and more diversified investor base that will be involved in Alibaba’s growth and future, especially from China and other markets in Asia.” This was stated by Chairman and CEO of Alibaba Group Daniel Zhang, according to a press release.

Alibaba shares last rose 5.52%.

“Strategic” move

The move is “very strategic” as the Hong Kong market does not offer Alibaba as much liquidity as the US market, said Ronald Wang, non-executive chairman of Partners Fintech Holdings.

“We need something else, we need Stock Connect to get mainland Chinese investors to invest in stocks,” he said on CNBC’s Street Signs Asia on Tuesday.

Stock selection and investment trends from CNBC Pro:

An initial listing in Hong Kong will allow Alibaba to be listed on the Shenzhen-Hong Kong Stock Connect, giving investors in mainland China access to the shares.

Chinese electric vehicle manufacturers Xpeng as well as Lee Auto have two primary listings in Hong Kong and the US, and both have been included in the share swap scheme.

The China Renaissance report for January notes that based on historical data, the turnover and speed of companies with a secondary listing in Hong Kong is much lower than that of ADRs in the US.

ADRs are American Depository Receipts that serve as a proxy for the shares of foreign companies listed in the US.

At the same time, Wang said that Alibaba is preparing for Disputes between the US and China over accounting issues continues.

US and Chinese regulators are working to resolve an audit dispute that could cause US-listed Chinese companies to be delisted.

“Just in case something goes wrong… Alibaba can move its primary listing back to Hong Kong and still have reasonable liquidity in terms of stock trading,” he said.

“I think this will be a good move for both the company and its investors,” he added.

— Evelyn Cheng of CNBC contributed to this report.