HKEX agrees to educate China investors about shares with weighted voting rights, pushes up Xiaomi stock

But smartphone maker won’t be traded via Stock Connects until joint working group finalises rules for inclusion

PUBLISHED : Wednesday, 18 July, 2018, 12:04pm
UPDATED : Wednesday, 18 July, 2018, 11:18pm

Hong Kong bourse operator Hong Kong Exchanges and Clearing said on Wednesday it had reached an agreement with bourses in Shanghai and Shenzhen to educate mainland investors about shares with weighted voting rights, such as those of Chinese smartphone maker Xiaomi.

HKEX announced a “special stability trading period” and said since mainland investors were not familiar with companies that employed such shareholding structures, there was a “need to consider the maturity and regulatory practices of the two markets when including weighted voting rights companies” in the list of securities eligible for trade through the Stock Connect schemes linking the bourse in Shanghai and Shenzhen with Hong Kong.

Xiaomi bickering exposes Hong Kong stock exchange’s rivalry with Shanghai and Shenzhen bourses

A joint working group will be set up to form the rules for including weighted voting rights companies as soon as possible, said the bourse operator. “Details of the special stability trading period are to be worked out by the joint working group and will be announced in due course,” said a HKEX spokeswoman.

Xiaomi will not be traded through the Stock Connects until the working group has worked out all the details, but that did not stop its stock from rising in Hong Kong on Wednesday. Shares in the world’s fourth-largest smartphone company plummeted this week after China temporarily halted trade in its shares by mainland investors.

Its shares rose to HK$22.2 as markets opened, bouncing back from a 9.6 per cent tumble at the beginning of the week. The stock is now just above the HK$22 mark that Xiaomi was seeking during its flotation last month.

Xiaomi shares fall after mainland bourses block them from Chinese investors in Stock Connect pool

In a statement over the weekend, the exchanges in Shanghai and Shenzhen put a temporary halt on mainland investors buying and selling Xiaomi’s Hong Kong-listed shares under the Stock Connect schemes. The curb came as part of a wider ban on certain securities, in what has been viewed as a race between the exchanges to be Asia’s fundraising hub for technology companies.

Shares in HKEX, which closed last week at HK$234, dipped on Monday following the announcement, opening at HK$236 and closing the day down by 0.17 per cent at HK$233.8. They fell by another 0.77 per cent to HK$232 on Tuesday. But on Wednesday, its stock rose by as much as 1.5 per cent to HK$235.40, and was at HK$234 at 11am, an increase of 1.1 per cent, or 2.6 points.