China to trial converting non-tradeable, HK-listed stock into free-floating shares
China’s securities regulator said on Friday it would launch a pilot scheme that allows mainland-incorporated companies listed in Hong Kong to convert their non-tradeable equity into free-floating shares.
The China Securities Regulatory Commission (CSRC) told a press conference in Beijing, that the so-called H-share companies can apply to participate in the pilot scheme, and the CSRC will select up to three qualified companies in the initial stage.
The move is made to “improve direct financing for companies, and support integrating Hong Kong into the national development”, a press release issued by CSRC said.
Under current rules, shares held by founders or major shareholders of Hong Kong-listed mainland firms are not eligible for trading on exchanges.
Analysts said the scheme would potentially increase share supply in the Hong Kong market, weighing on valuations, but it may also help boost turnover on the Hong Kong exchange.
The CSRC said on Friday that eligible participants should have a “relatively simple shareholding structure”, with market cap above HK$1 billion (US$127.91 million). The participants in the scheme can choose the proportion of shares they would like to float.
China Construction Bank, which debuted in Hong Kong in 2005, is the only Chinese firm whose shares are fully convertible.
The reform was first reported by China’s Caixin news outlet in November.
Additional reporting by Reuters.