Alibaba upgrades Hong Kong listing to primary status to woo Chinese investors

CChinese e-commerce giant Alibaba Group Holding is changing the status of its Hong Kong-listed company from secondary to primary on Aug. 28, paving the way for the company to gain broader access to investors on the mainland.

Alibaba announced Friday that its shareholders approved a long-awaited conversion that will add its current primary listing in New York. The move paves the way for Alibaba to join Hong Kong’s Stock Connect program, which will allow qualified mainland Chinese investors to more easily buy Hong Kong-listed stocks via a link between the city’s stock exchange and the Shanghai and Shenzhen stock exchanges.

The Hangzhou-based company’s potential inclusion in the cross-border investment program could happen in early September, subject to approval from authorities in Shenzhen and Shanghai, Bloomberg Intelligence analysts Catherine Lim and Trini Tan wrote in a note on Friday.

Billionaire co-founder and CEO of Alibaba, Joseph Tsai, said in an interview with the company’s South China Morning Post newspaper in May that the main reason for continuing the dual-base listing “is to tap into capital flows south through the Stock Connect program.” Alibaba has struggled to boost its Hong Kong-listed shares over the past year, which have fallen about 5%.

Alibaba first announced plans to change its Hong Kong listing status in 2022 amid increasing scrutiny from U.S. securities regulators over Chinese companies listed in the U.S. The e-commerce giant held the largest U.S. initial public offering in 2014.

Alibaba’s relisting in Hong Kong would be a boon for the city’s stock exchange, which has struggled in the past few years with headwinds including sluggish economic growth in mainland China and Beijing’s regulatory crackdown on sectors from technology to real estate. The move is expected to boost trading on the Hong Kong exchange south by about 7%, Bloomberg Intelligence analyst Sharnie Wong said in a note Friday.

Hong Kong Exchanges and Clearing (HKEX) reported record second-quarter revenue and net income of HK$5 billion (US$645 million) and HK$3.2 billion, respectively, driven by growth in new listings and trading activity. The exchange operator saw average daily trading volume from mainland investors via Stock Connect increase by 47% year-on-year in the three months ended June.

HKEX first launched its Stock Connect program in 2014 and has since attracted Chinese companies including billionaire He Xiaopeng’s electric vehicle maker XPeng, Li Xiang’s Li Auto and tycoon Rui Chen’s streaming platform Bilibili to apply for a dual primary listing in Hong Kong. The exchange operator is currently headed by Bonnie Chan, who was named to Asia’s 50 Over 50 list this year; Chan was promoted to the top job in March this year.