No joy for dual listers as biotechs, Star connect

Business | Winnie Lee 26 Nov 2020

Hong Kong yesterday said that dual-listed companies on the stock exchange surprisingly will not be included in the Stock Connect despite their large market sizes.

However, pre-profit biotech firms listed in Hong Kong as well as stocks on Shanghai's Sci-Tech Innovation Board will be included, Chief Executive Carrie Lam Cheng Yuet-ngor said in her annual policy address.

Relevant arrangements will be announced as soon as possible, a source from the government said.

Pre-profit biotech firms will qualify if they meet certain requirements such as inclusion in the Hang Seng Composite LargeCap Index or MidCap Index, or meet market capitalization requirements.

There are currently 24 unprofitable biotech firms listed on the local bourse. However, Lam made no mention of including secondary listed firms onto the Connect, which disappointed the market.

"Most of the dual-listed companies have primary listings in the United States,'' said Francis Kwok Sze-chi, managing director at Freeman Securities.

This could lead to technical difficulties.

"The government may want to balance the interests of the mainland and Hong Kong bourses to avoid capital outflows," said Kenny Wen Kit, a wealth management strategist of Everbright Sun Hung Kai.

Analysts believe dual-listed shares will not be included in the Stock Connect in the near future.

Hong Kong Exchanges and Clearing (0388) and dual-listed shares which were expected to join the Stock Connect retreated on the news. HKEX fell 2.3 percent to HK$383, (9618) fell 1.49 percent to HK$343 and Alibaba (9988) was down 1.11 percent to HK$267.

Analysts expect only a few biotech will be able to meet the requirements for the Connect. They believe that investor interest will be limited as the risks for these shares are high. Biotech shares fell, with Peijia Medical (9996) down 3.79 percent to HK$20.3. Market watchers expect it will be more attractive for capital going north as the total market value of biotech shares in Hong Kong is less than HK$200 billion while the total market value of the first 10 Star Board shares has exceeded 1.5 trillion yuan (HK$1.76 trillion).

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