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Hong Kong, China bourses agree to work towards adding dual-class shares to trading link
[HONG KONG] The Hong Kong stock exchange said on Wednesday it has agreed to work with China's bourses towards the inclusion of dual-class shares in a cross-border trading link, marking a step towards resolving a dispute regarding the link.
Bourse operator Hong Kong Exchanges and Clearing (HKEX) said in a statement Hong Kong-listed dual-class shares will need to establish their trading stability during an initial period after which they could be included in the so-called stock connect scheme, if other requirements are met.
HKEX also said that it would set up a working group with the Shanghai and Shenzhen exchanges to formulate the specific programmes and rules for the inclusion of dual-class shares in the trading link.
A spokesman for HKEX said no further details of the scheme were immediately available.
The announcement came after the two mainland stock exchanges said in a surprise move on Saturday they would not expand the stock connect scheme with Hong Kong to foreign firms, so-called "stapled" securities, and companies with different voting right structures.
The mainland exchanges said the move was aimed at protecting less sophisticated investors from the complexities of such shares.
The ban was considered a blow to Hong Kong, which has been working to improve its ability to attract Chinese tech companies to list in the city.
HKEX said the three exchanges acknowledged that as mainland investors were not yet familiar with weighted voting rights (WVR) companies, there was a need to consider the maturity and regulatory practices of the two markets.
Shares of Chinese smartphone maker Xiaomi Corp plunged on Monday after the weekend announcement, before recovering later in the day.
Xiaomi was the first company to list in Hong Kong with weighted voting rights and investors had hoped that its inclusion in the Hang Seng Composite Index this month would help attract capital from the mainland.
Xiaomi shares jumped more than 6 percent on Wednesday after the HKEX announcement.
On Monday, HKEX chief executive Charles Li said he was flying to Beijing to discuss the rule change with mainland authorities.
The stock connect scheme, which links exchanges on the mainland with the Hong Kong bourse, allows Chinese investors their only direct means of trading offshore stocks and international investors access to China's companies.