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China to allow dual class shares in Stock Connect

China takes a further step in the broadening out of its share trading initiative with Hong Kong.

China’s regulators have taken a further step towards the broadening of the Stock Connect share trading scheme with Hong Kong after they announced that companies with dual class shares would now be eligible through the trading link.

The Shanghai Stock Exchange and Shenzhen Stock Exchange said in a statement on Saturday that only companies whose primary listing was in Hong Kong would be added to the scheme.

Dual class shares are a type of share class structure in which certain shareholders are given access to securities that grant them greater control and voting rights. Hong Kong revised its rules in 2018 to allow them.

The Shanghai and Shenzhen bourses gave the example of Bilibili, which has dual class shares, as being eligible, subject to meeting certain requirements. They said that the internet giant would be eligible for inclusion in Stock Connect after it converted its primary listing to Hong Kong earlier this month.

An increasing number of Chinese companies are aiming to convert their secondary listings in Hong Kong to primary ones, primarily in response to threats in the US to delist them due to a spat with Beijing over access to audit papers.

The Shanghai-Hong Kong Stock Connect was launched in 2014 and its Shenzhen equivalent was launched two years later, allowing investors in Hong Kong to purchase shares in mainland China and vice versa without having to go through the hassle of setting up trading accounts in another jurisdiction.

According to Hong Kong Exchanges and Clearing’s most recent financial statement, average daily turnover (ADT) among Hong Kong-based investors via Stock Connect was HK$33.2bn ($4.2bn), equivalent to almost a quarter of headline ADT on the exchange.

Part of the Mark Allen Group.