“The main reason for us to proceed with the dual primary listing is because we want to tap into the southbound capital flows through the Stock Connect programme,” said Joe Tsai, co-founder and chairman of Alibaba, in an interview referring to the buying and selling of shares in Hong Kong by mainland investors through Stock Connect. A separate northbound investment channel allows global investors to access the vast domestic pool of China’s yuan-denominated stocks.

“All our users and customers are in China. They have intimate familiarity with our services and products and they should get access to the stock and participate in our growth.”

Exposure to mainland investors will provide a long-heralded boost to Alibaba’s Hong Kong-traded shares at a time when onshore funds are starting to have a bigger influence on the city’s US$5.3 trillion stock market.

Mainland investors have pumped in HK$233.5 billion (US$29.9 billion) into Hong Kong stocks this year, helping drive the Hang Seng Index into a bull market, as they diversify their wealth into assets denominated in Hong Kong dollars, a currency that is pegged to the surging US dollar.

Alibaba owns the Post.

The Stock Connect programme was introduced in 2014 and has evolved into a popular conduit for Chinese investors to diversify their domestic investments. Onshore funds contribute to about a third of Hong Kong stock market’s turnover and the value of their holdings is estimated at over HK$2 trillion, concentrated on blue-chip, bellwether companies like Tencent Holdings and HSBC Holdings.

“Once the upgraded listing status comes to fruition, the company could expect to see some greater market liquidity for its stock,” said Tim Waterer, chief market analyst at KCM Trade. “The move towards a primary listing in Hong Kong has perhaps taken a little longer than expected, but nonetheless such a move should open up Alibaba stock to a new audience of potential investors (from mainland China).”

Alibaba’s stock rose 1.9 per cent to HK$82.65 in Hong Kong on Tuesday, taking its year-to-date gains to 9.3 per cent. Still, it has underperformed the 11 per cent advance in the Hang Seng Index and a 30 per cent upsurge in Tencent in the span.

Alibaba is the third-biggest constituent of the 82-member Hang Seng Index, with a 7.5 per cent weighting, next only to Tencent and HSBC. Its Hong Kong listing is worth HK$1.6 trillion, while the American depositary receipts are valued at US$194.5 billion, according to Bloomberg data.

Unlike its peers Tencent, Meituan and Xiaomi, the e-commerce platform operator is one of the few mega Chinese tech companies listed in Hong Kong whose shares mainland investors are barred from purchasing.

“Inclusion in the Stock Connect for sure can bring some tailwinds to Alibaba’s shares, due to potentially rising demand from more investors,” said Wu Kan, an investment manager at Soochow Securities in Shanghai. “But at the end of the day, whether the stock can sustain the gain all rests on earnings.”

Alibaba’s shares are seen benefiting from a range of catalysts over the next six to 12 months, including an acceleration of growth in customer management revenue and positive financial impact from the new investment cycle across businesses, according to JPMorgan.

The stock suffered a 73 per cent slump from its all-time high in October 2020, as the company grappled with a major restructuring of its sprawling businesses with its financials hit by weak consumer spending.

A turnaround in Alibaba’s business performance may need a reversal of the downtrend in China’s property market, a major repository used by Chinese investors for storing their wealth, according to Alibaba’s Tsai. A silver lining for the industry has emerged after key cities like Hangzhou and Xian scrapped all the restrictions on home purchases.

“Chinese households have a lot of cash, estimated at US$19 trillion sitting in bank accounts,” Alibaba’s Tsai said. “We do not doubt the ability of Chinese consumers to spend, but their willingness to spend has been affected by the lack of confidence in the economy. The biggest driver of confidence is the property market’s outlook.”