China kicks off H-share full circulation trial as Legend picked in pilot programme

China has officially started a pilot programme allowing the bulk of shares in Chinese companies listed in Hong Kong to trade freely on the stock market, a move that will triple the current market cap of H shares and align interest between investors and owners.

Legend Holdings will be taking part in the trial known as the full circulation of H shares, the China Securities Regulatory Commission said on Friday, without announcing the actual date.

The programme will enable major shareholders in these companies to convert their non-tradeable stocks into ordinary shares that can be bought and sold like common shares on the exchange.

The move has set the stage for a spike in values of the stocks held by big shareholders of the H-share companies, after a gauge of these mostly state-owned companies surged 25 per cent last year.

Once fully converted, the non-tradeable shares of the 250 H-share companies would be valued at HK$2.6 trillion (US$410.9 billion), adding to the current market values of HK$1.1 trillion, according to Citic Securities. The reform can roughly boost the total market cap of Hong Kong stocks by 8 per cent, the brokerage said.

China’s securities regulator has limited the pool of available shares to those that were floated in initial public offerings.