HKEx says deal reached on dual-class shares in link

By BLOOMBERG

HONG KONG • Chinese investors will eventually be able to buy stocks with weighted-voting rights, such as Xiaomi Corp, through links with Hong Kong, the city’s stock exchange said in a statement, days after China’s bourses barred such companies from the cross-border trading programme.

Hong Kong Exchanges and Clearing Ltd (HKEx) said it reached an agreement with the Shanghai and Shenzhen bourses on Tuesday to set up a working group to form rules on the new adjustment as soon as possible. It didn’t provide details on the timing.

The decision marks a partial victory for HKEx CEO Charles Li, who flew to Beijing after Chinese exchanges surprised the market on Saturday when they said they would exclude companies like Xiaomi from the stock connect because investors didn’t understand the risks associated with the new products. Permitting weightedvoting structures was the centrepiece of a years-long struggle to attract technology listings to Hong Kong.

Shares in Xiaomi, which fell as much as 9.6% on Monday, rallied as much as 6.2% after the new arrangement was announced. The stock closed up 3.1% yesterday, while HKEx shares gained 0.6%.

It could take six-to-12 months to develop a plan to allow shares with weighted-voted rights in the stock connect, said Ronald Wan, CEO at Partners Capital International Ltd in Hong Kong.

“The key is to protect mainland investors’ rights when they buy shares such as Xiaomi,” Wan said. “That requires legislation in China, but as a temporary solution, the authorities and HKEx may require extra riskwarning statement from Hong Konglisted weighted-voting rights firms, and ask mainland investors to sign a statement that they understand the risk.”