Hong Kong Stock Exchange operator Hong Kong Exchanges and Clearing Limited (HKEX) has received support from brokers and fund managers for its proposed plant to attract more tech giants to list their shares in the city. The plan involves a number of policy changes that would expand the use of dual-class shares and give corporate shareholders increased voting rights.
According to reports citing sources with knowledge in the matter, HKEX is currently collecting feedback on its plan to allow corporate shareholders, in addition to founders and key executives, to own shares that have increased voting rights compared to other shares listed on the exchange.
Some brokers and fund managers have expressed concerns that the strategy could give key stakeholders unfair influence over certain companies. However, the HKEX assured that if the strategy is implemented, they would have some safeguards put in place to protect ordinary shareholders.
The strategy is part of HKEX's continued efforts to attract more US-listed tech giants to launch a secondary listing in the city. The move comes as the relationship between China and the US continues to sour. So far, its efforts have worked with both JD.com and NetEase having already submitted their application for a secondary listing.
Of the dozens of US-listed Chinese companies, 38 currently do not qualify for a secondary listing in Hong Kong. The companies that do not qualify are those with a weighted voting right (WVR) system for corporate shareholders. That type of structure is however allowed in other exchanges such as in Singapore. HKEX noted that around 42 percent of US-listed Chinese firms have a WVR structure.
The move to expand the use of dual-class shares would be an expansion of policy changes introduced by the bourse operator back in April 2018, when it allowed companies with key executives holding shares with greater voting rights to list on the exchange. The new proposal basically extends the previous policy change to include corporate shareholders.
Analysts from accounting firm BDO stated that the proposed change is a logical move for the bourse operator, as it would definitely attract more companies. It added that individuals are already allowed to hold shares with increase voting rights and it would make sense for HKEX to allow corporate shareholders to do the same.
The 2018 policy change, which allowed companies with multiple share classes with varying degrees of voting rights to list in the bourse, had proven to be successful. After the change, several Chinese firms such as Xiaomi and Meituan Dianping, and Alibaba, were able to launch their secondary listings. The new listing greatly boosted the bourse's total raised capital, with the three aforementioned companies accounting for nearly 14 percent of the bourse's total market capitalization last year.
