Hong Kong and mainland exchanges reach agreement on trading of dual voting rights companies
Dec 10, 2018 (China Knowledge) - The Hong Kong stock exchange has said that it has reached an agreement with its mainland counterparts, the Shanghai and Shenzhen stock exchanges, on trading of Hong Kong-listed companies with dual voting rights by mainland investors.
The agreement is related to the stock connect schemes that link the mainland exchanges to the Hong Kong stock exchange and will benefit companies such as Xiaomi which has a dual voting rights share structure.
This is because the Shanghai and Shenzhen stock exchanges had said that dual voting rights companies such as Xiaomi will be excluded from the stock connect scheme, potentially cutting billions of yuan in capital for the smartphone maker.
The three exchanges will be working to form the relevant rules and will announce them to the market once the necessary procedures are completed. The new rules are expected to be implemented mid-2019.
The stock connect scheme provides a gateway for Chinese investors to trade offshore stocks and international investors to invest into Chinese stocks. Some concerns over the stock connect are that it may drain liquidity out of the Shanghai and Shenzhen stock exchanges due to the current weak A-share market and the rivalry between the exchanges to be the preferred listing destination.
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