Why Chinese ADRs Will Keep One Foot in New York

Amid the bellicose posturing of the US-China trade war, Hong Kong is emerging as a safe port for China’s corporate refugees – but there are powerful reasons for at least some of these ADRs to stay where they are.

Among China’s biggest new economy names, Alibaba was touted as the secondary listing that would blow the doors off the Hong Kong bourse to allow China’s other tech giants – the Baidus, the JD.coms and the Weibos – to rush in.

Certainly its mega-listing in late 2019 went a long way to rectifying the IPO loss of five years earlier and restoring confidence in the Hong Kong exchange as the rightful home to China’s tech giants.

Particularly telling was the fact that a cash rich Alibaba did not need to raise additional funding for operational reasons. The secondary listing was seen by the market as something of a homecoming.

But while Alibaba was eligible to list in Hong Kong, it was ineligible for the Hang Seng Index (HSI) until the index compiler modified its rules in mid-May to permit companies with weighted voting rights (WVR).

Though the earliest inclusion will occur in August 2020, it’s had little impact on the appetite of investors who have reflected their support for advanced technology and new economy stocks with heavy trading volumes and rich market valuations.

Along with Alibaba, notable tech stocks that qualify for the main benchmark include smartphone manufacturer Xiaomi and food delivery Meituan Dianping … [read more]


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