Alibaba to Pursue 'Dual Listing' in Hong Kong... "Direct Investment Path Opens"

[Asia Economy Reporter Kim Hyunjung] Alibaba, China's largest e-commerce company, has applied for a dual listing on the Hong Kong Stock Exchange, Bloomberg reported on the 26th. The report stated that this change will open the door for investors within China to directly purchase Alibaba shares for the first time.

On the same day, Daniel Zhang, Alibaba's CEO, announced in a statement, "We will establish a broader and more diverse investor base," revealing this policy. He added, "Hong Kong is a stepping stone for Alibaba's globalization strategy, and we are confident in China's economy and future," explaining, "We will share Alibaba's growth and future with Chinese-speaking users and the company."

In a statement posted on its website, Alibaba said the board has authorized management to proceed with a primary listing on the Hong Kong Stock Exchange, and if the related procedures are completed by the end of the year, Alibaba will become a dual-listed company on both the US and Hong Kong stock exchanges. The company stated, "The dual listing status will help broaden the investor base and increase liquidity," and "especially attract more investors from China and other parts of Asia."

Alibaba was first listed on the New York Stock Exchange in September 2014, followed by a secondary listing on the Hong Kong Stock Exchange in 2019. When primarily listed on the US stock market and secondarily listed in Hong Kong, the requirements are simpler than for an initial or dual primary listing. Therefore, many Chinese companies listed in the US, including Alibaba, have added secondary listings in Hong Kong. However, to change a secondary listing in Hong Kong to a primary listing, stricter standards equivalent to a new listing must be met.

However, stocks of companies with secondary listings, which have lower standards than primary listings, are excluded from the Shanghai-Shenzhen-Hong Kong Stock Connect programs (known as the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect). This made it difficult for mainland Chinese investors to trade these stocks directly. Market observers suggest that if Alibaba completes a primary listing in Hong Kong and is included in the Stock Connect programs, additional investment funds from the mainland could flow in, positively impacting Alibaba's stock supply and demand.

In the first half of this year, the average daily trading volume of Alibaba shares was about $3.2 billion on the US stock market and $700 million on the Hong Kong stock market. Willer Chen, an analyst at Fosun Asia, told the news agency, "Considering Alibaba is the largest secondary listed company in Hong Kong, this is a significant move," adding, "Alibaba's investor base will become more diverse, and mainland Chinese investors will be able to invest directly in Alibaba."

The report also pointed out, "Other companies may follow Alibaba's lead," and "In a situation where US authorities threaten to expel Chinese companies from their exchanges if they do not comply with accounting standards, Hong Kong could solidify its position as an alternative market."

Since founder Jack Ma publicly criticized authorities in October 2020, Alibaba has become a prime target of big tech regulations, including a 3 trillion won antitrust fine, and its stock price has plummeted more than 60% from its peak in 2020. Following the news of the dual listing push, Alibaba's stock price surged more than 5% intraday on the Hong Kong stock market.