China set to allow investors to buy shares of tech firms

Bloomberg

Chinese authorities proposed rule changes that would for the first time allow local investors to buy shares of some popular technology companies listed in Hong Kong — including, potentially, Alibaba Group Holding Ltd.
The country’s stock exchanges published draft regulations that would bring stocks with different classes of voting rights into the trading links between the mainland and
the former British colony, giving onshore traders access to some of China’s hottest startups.
Xiaomi Corp and Meituan Dianping went public in Hong Kong last year, the first major tech firms to use new rules permitting weighted-voting rights, also known as dual-class shares, on the city’s bourse.
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 $20 billion.
China’s authorities have been trying to find ways to keep the country’s tech companies at home, and last year worked on plans for depositary receipts, which were designed to let dual-class shares, not permitted on its major exchanges, trade onshore.
A new trading venue, the Star market, allows the structure, though only smaller companies have so far gone public.
Hong Kong Exchanges & Clearing Ltd’s years-long push for weighted-voting rights, which are often used by tech founders to keep control of their companies even after going public, was in
part premised on China-based technology firms choosing Hong Kong over the US because Chinese onshore investors would easily be able to invest via the stock connect.
But mainland authorities said in July 2018 that dual-class shares wouldn’t be allowed in the system, a decision that caused Xiaomi’s shares to slump.
In December, the Shanghai, Shenzhen and Hong Kong exchanges said they had agreed on a “detailed arrangement” for including shares with unequal voting rights into the connect, without providing more details.
The new rules were expected to begin in mid-2019, the bourses said at the time.
A change would likely boost HKEX, which stands to benefit from increased trading volume.
The bourse operator currently generates about 5 percent of its revenue from the links with stock exchanges in Shanghai and Shenzhen.