Alibaba Group Holding said it would switch its listing status in Hong Kong, in a technical move that qualifies the technology behemoth to sell shares to mainland China's 220 million stock investors.
The Hangzhou-based company, whose shares had been listed in New York since 2014 and in Hong Kong since 2019, will convert into a dual-primary listing status on the Hong Kong stock exchange starting August 28, from its previous secondary listing status, according to a statement on Friday.
The new designation would qualify Alibaba's shares for the Stock Connect cross-border investment channel when the exchange operators of Shenzhen and Shanghai convene on September 5 to review what to add into the programme. Alibaba, one of China's largest technology behemoths with HK$1.58 trillion (US$202.7 billion) in value for its Hong Kong listing, would be very likely to make the cut, clearing the way for mainland investors - those with at least 500,000 yuan (US$70,089) in assets - to take their first bite of the stock on September 9 the earliest.
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"It will bring a tailwind to Alibaba's shares for sure, and inject liquidity" into the stock, said Dai Ming, a fund manager at Huichen Asset Management in Shanghai. "It does make a huge difference in terms of whether stocks can be traded through the Stock Connect."
Alibaba's shares advanced 0.7 per cent to a three-month high of HK$82.20 in Hong Kong after the announcement. The Hang Seng Index, the city's market benchmark, fell 0.6 per cent.
The listing ceremony of Alibaba Group Holding in Hong Kong on 26 November 2019, attended by the company's then CEO Daniel Zhang Yong (centre). Photo: Sam Tsang alt=The listing ceremony of Alibaba Group Holding in Hong Kong on 26 November 2019, attended by the company's then CEO Daniel Zhang Yong (centre). Photo: Sam Tsang>
The journey of Alibaba's shares to New York and back on China's doorstep was 10 days shy of a decade in the making. The company's founders had long rued the fact that Alibaba, which earns most of its revenue from China, could not share its capital gains with the nation's legion of stock investors.
"The main reason for us to proceed with the dual primary listing is because we want to tap into the southbound capital flows through the Stock Connect programme," said Joe Tsai, co-founder and chairman of Alibaba, during an interview in May. Alibaba owns the Post.
It is also good news for a battered company that has lost more than 70 per cent of its market capitalisation since reaching its record high in October 2020. Inclusion in the connect scheme may attract US$12 billion of investments to the stock within six months, according to a forecast by Morgan Stanley.
The move would also deepen the role of mainland investors in Hong Kong's US$5 trillion stock market, where they already make up about one third of the daily turnover on the bourse. Chinese capital is estimated to hold about HK$2 trillion of stocks, including such bellwethers as the games publisher Tencent Holdings, HSBC and China Mobile.
There are precedents for the successful switch in designation. Shares of Tuhu Car, a car maintenance company in Shanghai, jumped 26 per cent one month after its inclusion in the Stock Connect in April. Shandong Hi-Speed Holdings advanced 16 per cent in the ensuing month following its qualification in March.
The connect programme was introduced in 2014 and has developed into a popular conduit for Chinese investors seeking to diversify their domestic investments. Global investors are also able to dip into China's US$8.2 trillion stock market via the so-called northbound channel of the scheme.
China's retail stock investors, whose numbers surpass the memberships in the Communist Party, do not have access to the shares of many Chinese companies listed offshore, until their inclusion in the connect scheme. Besides Alibaba, online retailer JD.com and search engine Baidu are yet to join Connect. Tencent, delivery giant Meituan and appliance-to-smartphone maker Xiaomi are already accessible via the scheme.
Alibaba has risen 8 per cent in Hong Kong this year, at a fraction of Tencent's 29-per cent gain, partly due to the lack of backing by home-market investors. Alibaba's shares are also cheaper, trading at 9.7 times estimated earnings compared with Tencent's 15.8-times multiple.
To boost investor confidence and bolster valuation, the company has expanded its share-buyback program. In the most recent quarter that ended in June, Alibaba spent US$5.8 billion buying back its stock, Tsai said during the annual general meeting on Thursday. The company bought US$12.5 billion of its shares in the fiscal year that ended in March 2024, after a US$10.8 billion in the 2023 fiscal year.
"We believe that our current share price does not reflect the intrinsic value of the company, so obviously we will be very constructive with share repurchases at current price levels," Tsai said.
A rising Alibaba stock could also lift the Hong Kong market, as the stock is the third-biggest component of the 82-member Hang Seng Index, with an 8.1-per cent weighting, behind HSBC and Tencent. Its American depositary receipts are valued at US$202 billion, the equivalent of the Hong Kong listing, Bloomberg data showed.
For now, its shares are 73 per cent off its all-time high set on October 28, 2020, battered by years of government crackdown on the tech industry and stiffer competition from rivals such as budget e-commerce platform operator PDD Holdings. Revenue for the quarter to June slowed to 4 per cent year-on-year, with that from the core e-commerce unit logging 1 per cent decline, underscoring its biggest business reshuffle aimed to revive growth has yet to prove successful.
Alibaba's effort to make its way into the Stock Connect is a sign that the company has doubled down on its returns on shareholders beyond its US$65 billion share buy-back plan, according to Qin Heping, an analyst at Guotai Junan Securities in Shenzhen.
"It's progressing smoothly," said Qin. "That'll improve liquidity and serve as a fresh catalyst for the stock."
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