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Why Chinese Firms Are Upgrading Their Hong Kong Listings

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When New York-listed Alibaba Group Holding Ltd. said in July it wanted to change its “secondary” listing status in Hong Kong to “primary,” it wasn’t the first and may not be the last Chinese company to do so. The process is costly and time-consuming but it could make it easier to access a vast pool of capital in the mainland. It also would keep the stock trading if a company is forced to delist in the US.

It refers to the main stock exchange where a public company’s shares are traded. To list, a firm has to fulfill the requirements of that market, as Alibaba did when it pulled off a then-record $25 billion initial public offering on the New York Stock Exchange in 2014. Secondary listings like the one Alibaba did in Hong Kong five years later are often subject to less-stringent regulation. They may increase liquidity in trading of the shares and provide access to a wider pool of investors.