HK exchange brushes off mainland bourses’ dual-class shares snub

HONG KONG: Hong Kong’s exchange described as “temporary” a dispute with its Shanghai and Shenzhen counterparts over plans to bar investor access to dualclass shares, a move that led to smartphone maker Xiaomi Corp tumbling as much as 10% yesterday.

The Shanghai and Shenzhen exchanges caught investors and exchange officials off guard at the weekend when they said they would not allow mainland investors to buy shares in Hong Kong-listed foreign firms, companies with different voting right structures or so-called “stapled” securities.

China’s Xiaomi, which made a weak debut last week, was the first company to list in Hong Kong with weighted voting rights in a US$4.7 billion (RM19 billion) deal following a historic rule change in the city to allow dual-class share structures.

Investors had however hoped that Xiaomi’s inclusion later this month into the Hang Seng Composite index – which forms the basis for shares included in the stock connect – would help attract a flow of capital from the Chinese mainland.

Stock Connect links the Shanghai, Shenzhen and Hong Kong bourses, allowing mainland investors their only direct means of trading offshore stocks and international investors access to domestic Chinese companies.

The Shanghai and Shenzhen exchanges announced on Saturday they would block mainland access after consulting domestic brokerages and that most investors expressed a lack of understanding of the new types of securities.

CEO of Hong Kong Exchanges & Clearing, Charles Li, said yesterday he would discuss the move with Chinese regulators and his bourse counterparts. – Reuters