Why Alibaba chose Hong Kong to list its shares despite protests

Hong Kong, China – While dozens of protesters barricaded themselves into a university in Hong Kong last week with riot police waiting outside, the latest chapter in nearly six months of often violent anti-government demonstrations, the territory’s stock market was rallying.

The Hang Seng Index, which tracks the largest 50 companies listed in Hong Kong, jumped almost three percent in the three days to November 19.

The move in share prices was a reflection of the progress that was reportedly being made to resolve the United States-China trade war during long-distance phone conversations between officials in Beijing and Washington, DC, rather than the petrol bombs and tear gas that were being fired off on the city’s streets.

And a huge swing towards pro-democracy candidates in this weekend’s local council elections in Hong Kong sent stocks higher again on Monday.

Meanwhile, mainland Chinese e-commerce giant Alibaba is getting ready to launch on Tuesday what could become one of the world’s largest initial public offerings (IPOs) this year, and the biggest in Hong Kong in nearly 10 years, with a $13bn share sale.

All these developments show the immense challenges and opportunities that Hong Kong faces in the coming years as it seeks to defend its status as one of the most open economies in the world. And a proposed law that would reverse the way the US treats Hong Kong if it is passed is adding to the concerns among the territory’s investors.

Despite the territory falling into a recession because of the double-whammy of the protests and the trade war, analysts say there are many reasons why Alibaba has chosen Hong Kong as the second venue to list its shares after New York.

The protests are being driven by frustration at what many see as a squeeze on the territory’s freedoms by Beijing, and on people’s living standards due in large part to rising housing costs.

A sort of homecoming

So the upcoming secondary listing of Alibaba – its debut on the New York Stock Exchange in 2014 remains the world’s largest IPO to date – is being seen by many analysts as a big win for Hong Kong, the company and Beijing.

The company priced its Hong Kong shares at a 2.6 percent discount to its New-York traded securities.

“The company is pricing its shares at a slightly lower-than-expected level to ensure the listing gets a lot of interest,” Philip Ho, director of BCP Investment Limited, told Al Jazeera.

Bright Smart Securities estimated that the listing could increase the trading volume of the Hang Seng Index by around 10 percent.

“The homecoming for Alibaba at this period of time is certainly welcomed by locals here and provided a much-needed boost of confidence,” a Hong Kong-based equity analyst who asked not to be identified told Al Jazeera. “It could create a trend and encourage other mainland business to come list in Hong Kong, instead of prioritising the US markets.”

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  1. All these developments show the immense challenges and opportunities that Hong Kong faces in the coming years as it seeks to defend its status as one of the most open

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