Stock Connect to include dual-class HK stocks

Stock exchange operators in Hong Kong, Shanghai and Shenzhen have agreed on conditions that will allow mainland investors to trade Hong Kong-listed dual-class shares of some popular technology companies, such as Xiaomi or Alibaba, through the Stock Connect programs, reports Caixin Global. 

Weighted voting rights are favored by founders of tech and family-owned companies as a way of retaining control of their businesses after public listings. Last year, smartphone maker Xiaomi and online services giant Meituan Dianping were the first major tech firms to list on the Hong Kong bourse using the new classes of shares. Alibaba, which uses the structure and is listed in New York, is said to be readying a Hong Kong listing under the new regulations, which could raise as much as US$20 billion. 

A change would likely boost HKEX, which stands to benefit from increased volume, according to Bloomberg. The bourse operator currently generates about 5% of its revenue from the links with stock exchanges in Shanghai and Shenzhen. 

Under Friday’s draft proposal, companies would need to meet the following criteria to be included in the stock connect:

  • Average daily market value of at least HK$20 billion (US$2.56 billion) for just over six months.
  • At least HK$6 billion in total transaction value for just over six months
  • Be listed in Hong Kong for at least six months and 20 trading days

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