Hong Kong bourse brushes off Shanghai and Shenzen dual-class share ban

Access to WVR firms has been banned amidst a reported lack of understanding of the new reform.

Hong Kong Exchange and Clearing Limited (HKEX) brushed off the plan by the Shanghai and Shenzen exchanges barring investors to buy shares in Hong Kong-listed foreign firms with weighted voting rights (WVR) structures.

The two Chinese exchanges moved to block Mainland access to such firms after a discussion with investors and brokerages who reported a lack of understanding with the new securities type. The move comes after the first company with WVR to list, Xiaomi, failed to live up to market expectations and opened on a disappointing note with a 6% drop on valuation concerns. 

Also read: Xiaomi's dismal debut flags trouble for Hong Kong's blockbuster IPO year

However, HKEX chief executive Charles Li has been quick to dismiss the move and reaffirms Hong Kong’s role as a valuable bridge between China and the rest of the world. “The recent differences between the two announcements by the Mainland exchanges and HKEX are not about whether to include WVR companies in Stock Connect, but when to include them, he said in a statement.

He added that the temporary delay actually gives Hong Kong a chance to pause and study how the reforms would play out.

The move, nonetheless, deals a blow to Hong Kong who earlier introduced sweeping reforms to its listing regime including a measure allowing companies with WVR to list in a bid to lure new economy firms.

Also read: Hong Kong's average IPO size shrunk 10% in the first half of the year

Li will be attending a meeting in Beijing organised by the China Securities Regulatory Commission to reach a consensus on the issue as he urges patience for investors and market watchers.

“There may be small disagreements in the short term, but it does not fundamentally change the forward trajectory of Stock Connect or the operation of the Hong Kong market,” he said. “We are very confident that Hong Kong, as an internationally-respected financial centre and critical connector between China and the international markets, will continue to play a vital role.”