Alibaba moves closer to home with Hong Kong dual-primary listing

Alibaba will apply for a dual-primary listing on Hong Kong’s stock exchange, in a move analysts say lays the groundwork to grant mainland Chinese investors access to its shares and help minimise disruption if US regulators force it to delist from Wall Street.

The New York-listed Chinese ecommerce group, which has a secondary listing in Hong Kong, said its board had authorised management to apply for a primary listing on the Hong Kong Stock Exchange and that the process was expected to be completed by the end of 2022.

Having a primary listing in Hong Kong is a requirement for dual-listed Chinese groups to be included in the city’s Stock Connect programme, which allows mainland Chinese investors to trade in a company’s shares. Inclusion can help bolster a stock’s valuation and liquidity. A dual primary listing means Alibaba will be subject to the full rules of Hong Kong’s stock exchange as well as those of New York.

Alibaba’s Hong Kong-listed shares were 6 per cent at the midday break on Tuesday. The Hang Seng Tech index, which tracks the 30 largest tech companies listed in the territory, rose 1.6 per cent.

Chief executive Daniel Zhang said the company hoped to foster “a wider and more diversified investor base to share in Alibaba’s growth and future, especially from China and other markets in Asia”.

Analysts said the move marked another step towards eventual inclusion in the connect scheme and could simplify a transition to trading solely in Hong Kong should US regulators force Alibaba and other Chinese companies traded in New York to delist.

“It’s a very smart move to fulfil the requirements of the Chinese [securities regulator] so eventually Alibaba can be included in the Stock Connect, and even if they’re delisted in the US they still have a back-up plan,” said Dickie Wong, head of research at Kingston Securities.

US regulators have demanded that Chinese companies make detailed audit reports available by 2024 or be ejected from Wall Street. The Financial Times reported on Monday that Beijing was preparing a system to bring some Chinese groups into compliance with US rules requiring public companies to let regulators inspect their audit files. But officials in Washington are sceptical that most will achieve full compliance.

Inclusion in the Stock Connect programme is also not guaranteed, since it requires a majority of annual trading activity to take place in Hong Kong before a company with a primary listing can qualify.

In its announcement on Tuesday, Alibaba said there had been a “significant increase in its public float in transaction volume” in Hong Kong since its secondary listing in late 2019.

But it acknowledged that average daily trading volume over the past six months in Hong Kong was about $700mn, while that for New York was about $3.2bn. That left Hong Kong’s share at less than 20 per cent of the total and far short of qualifying for the Stock Connect.

The push for a dual primary listing also came after the company revealed that the management of Ant Group, its affiliated payments and fintech platform, no longer served as Alibaba’s partners, as part of efforts by Ant to revamp corporate governance after a government crackdown.