As stronger US regulatory scrutiny and increased bilateral tensions cloud the prospects for such firms on Wall Street, some of China’s largest internet corporations are seeing customers increase their access to Hong Kong-traded shares via US depositary receipts.
Low turnover in the Hong Kong market
According to Bloomberg calculations, nine Chinese businesses with a primary listing in the United States and a secondary or dual primary listing in the Asian financial capital raised their holdings in Hong Kong last year.
With nearly doubled modifications, Alibaba Group Holding Ltd. and JD.com Inc. topped the list, accelerating the financial gap between the world’s two biggest economies and reversing a trend that has aided the growth of some of China’s most powerful companies and enriched global banks and investors with New York flotations in recent years.
While the “homecoming” of a large number of US-listed Chinese businesses and their selling in Hong Kong will help the city maintain its reputation as a financial center, the city’s stock market’s disproportionately low liquidity could cause concerns for shareholders.
“ADP delisting risk is a primary driver of this liquidity shift,” Willian Blair Investment Management money manager Vivian Lyn Thurston said.
“While most of the selling will ultimately transfer to Hong Kong,” HSBC strategists predicted, “the total aggregate trading volume for these shares is expected to drop as some institutional investors no longer trade in these shares.”