• Alibaba (9988.HK) intends to complement its New York presence by adding a primary listing in Hong Kong, aiming to attract investors in mainland China.
• The e-commerce giant’s decision, which was made public on Tuesday, comes as Washington and Beijing increase their scrutiny of Chinese companies’ listings, as well as following a devastating regulatory crackdown in China that cost Alibaba a $2.8 billion fine and derailed an IPO of its affiliate Ant Group.
• The audit dispute between China and the United States, which threatens to expel hundreds of Chinese businesses listed in New York, is also present in the background.

As the first significant business to take advantage of a rule change in the financial centre to attract high-tech Chinese enterprises, Alibaba (9988.HK) intends to complement its New York presence by adding a primary listing in Hong Kong, aiming to attract investors in mainland China.

The e-commerce giant’s decision, which was made public on Tuesday, comes as Washington and Beijing increase their scrutiny of Chinese companies’ listings, as well as following a devastating regulatory crackdown in China that cost Alibaba a $2.8 billion fine and derailed an IPO of its affiliate Ant Group.

The audit dispute between China and the United States, which threatens to expel hundreds of Chinese businesses listed in New York, is also present in the background.

Analysts predicted that the modification will make it simpler for mainland Chinese investors to purchase shares through the Stock Connect, a connection to the Hong Kong stock exchange. The Hong Kong benchmark (.HSI) was up 1.5 percent at 03:58 GMT while the shares were up 5.9 percent.

According to Louis Tse, managing director of Wealthy Securities, “Being on Stock Connect means it will be more convenient for mainland Chinese investors to buy the shares at some point, therefore investors are pleased to step in today and buy the stock in Hong Kong.”

Alibaba, which has had a secondary listing on the Hong Kong Stock Exchange since 2019, said it anticipates finishing the primary listing by the end of 2022. The dual listing, according to Chief Executive Daniel Zhang, would encourage a “wider and more diversified investment base.”

The action follows a rule change made by the Hong Kong Stock Exchange (HKEX) in January that permitted “innovative” Chinese companies with weighted voting rights or variable interest entities (VIEs) to conduct dual primary listings in the city if they were engaged in the internet or another high-tech industry.

In a VIE structure, a Chinese company creates an offshore entity for the purpose of listing its stock abroad. This enables international investors to purchase shares of the company.

Alibaba’s CEO Zhang stated in a statement that “Hong Kong is also the launchpad for Alibaba’s globalisation strategy, and we are completely confident in China’s economy and future.”