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Hong Kong set for billions in inflows from China companies' listing upgrades

By Scott Murdoch and Kane Wu
    HONG KONG, July 27 (Reuters) - Hong Kong is set to see
billions of dollars flowing in from the mainland with more
Chinese companies expected to upgrade their listings in the city
to tap into a bigger pool of capital amid the looming threat of
delistings in the United States.
    E-commerce giant Alibaba Group  9988.HK  said on Tuesday it
would apply to convert its Hong Kong secondary listing into a
dual primary that would make it easier for mainland Chinese
investors to buy its shares.  urn:newsml:reuters.com:*:nL1N2Z700O
    The move is likely to prompt other major firms such as
JD.Com Inc  9618.HK , Netease Inc  9999.HK  and Baidu Inc
 9888.HK  to consider upgrading to dual primary listings, said
Periscope Analytics founder Brian Freitas, who publishes on
Smartkarma.
    The main advantage for the companies upgrading their
listings in Hong Kong to dual primary is that they can apply to
be included in Stock Connect, a link to the city's bourse which
allows mainland Chinese investors to buy stocks more easily.
    Chinese e-commerce firm Dingdong Ltd  DDL.N  has started
preparations on its dual primary listing in Hong Kong with its
advisers, three people with direct knowledge of the matter told
Reuters.   
    Dingdong aims to launch the deal as soon as the fourth
quarter, said one of the sources. The company backed by
SoftBank, is seeking a Hong Kong primary listing only a year
after it raised $95.7 million in an U.S. IPO.  urn:newsml:reuters.com:*:nL3N2OB35W
    All the sources declined to be identified, as they were not
authorised to speak to the media. 
    Dingdong, JD.Com and Netease did not immediately respond to
a request for comment from Reuters. Baidu declined to comment.
    "It could be a good example when you have the giant
(Alibaba) converting from a secondary listing to a dual primary
for others to follow suit," said Stephanie Tang, a partner at
law firm Hogan Lovells.
    "Those companies keep their existing primary listing, they
have another avenue to access capital, it gives them more
choices and opportunities to diversify their investor base."
    Allowing Alibaba into Stock Connect could see $21 billion
inflows in its Hong Kong listed shares, Bernstein analysts
estimated, if its total ownership from mainland investors
reached 7% to 10% in line with some of its large cap rivals.
    Goldman Sachs said in a report southbound buying could reach
almost $30 billion if Alibaba and 14 other secondary listed
companies in Hong Kong converted to a dual primary listing.
    The inflows would provide a welcome boost to the Hong Kong
market. The Hang Seng Index  .HSI  has fallen 12% and the Hang
Seng Tech Index  .HSTECH  has sunk 19% so far this year.
    Among other Chinese firms considering similar moves, video
platform Bilibili Inc  9626.HK  said in a May statement that it
had applied for a Hong Kong dual primary listing and hoped to
have the deal finalised on Oct. 3.
    Increased numbers of dual primary listings is unlikely to
deliver capital markets investment bankers a windfall, though,
with most of the prospective candidates not needing to issue new
shares.
    Listing upgrades will also help the companies prepare for
delisting if the standoff between Beijing and Washington, which
is threatening to kick out hundreds of Chinese companies listed
in New York, over auditing access is not resolved.  urn:newsml:reuters.com:*:nL1N2Z70L4
    "Although, the dialogue between the Chinese and U.S.
regulators is still underway, the delisting risk is looming
large given the overall geopolitical tension, the prolonged
negotiation process and the fast approaching deadline," Li He,
Davis Polk partner, said.
    "Against this backdrop, more U.S. listed Chinese issuers are
expected to pursue dual primary listings."

 (Reporting by Scott Murdoch and Kane Wu in Hong Kong, and Zhang
Yan in Shanghai; additional reporting by Jason Xue in Shanghai;
Editing by Sumeet Chatterjee and Kim Coghill)
 ((Scott.Murdoch@thomsonreuters.com;))

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