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Equities

Listings war heats up as Hong Kong and Shanghai woo tech companies

New rules make it easier for outsiders to list but investors may be vulnerable

New rules to be announced by the Hong Kong stock exchange are aimed at attracting listings by fast-growing Chinese technology companies.

HONG KONG -- Competition between stock exchanges to attract tech companies is heating up, with the Hong Kong Exchange & Clearing set to announce new rules allowing dual-class stock listings, and China attempting to attract foreign companies listed outside the country to its exchanges such as Shanghai and Shenzhen using Chinese depository receipts.

Behind the competition between stock exchange operators are multinationals becoming increasingly selective about which exchange to list on, especially tech companies with high growth potential. 

Some critics say, however, regulations for such listings are becoming too lax, and may allow companies with unusual ownership structures to list, something that might not be in investors' best interests. 

The rules to be announced by the Hong Kong exchange Tuesday, to take effect on April 30, will allow specific shareholders to have more heavily weighted voting rights than other shareholders. The rules are meant to attract listings by founder-controlled Chinese technology companies. 

The rules will open the door for tech companies that have issued duel-class shares, as well as nascent biotechnology startups that have yet to make a profit. The rules are also partly designed to attract major businesses currently listed in New York and on other major exchanges.

"It is only a matter of time for companies like Alibaba Group Holding and Xiaomi to list themselves in Hong Kong," said Charles Li Xiaojia, CEO of the Hong Kong stock exchange, calling the new rules the exchange's "biggest reform in 25 years."

Meanwhile, China is attempting to attract yet-to-be-listed tech companies and "unicorns" -- companies privately valued at $1 billion or more -- to its exchanges. The plan is to have such companies issue CDRs backed by their shares, making it easier for them to list in China as well as on exchanges outside the mainland, such as Hong Kong. Alibaba, Tencent  Holdings and Baidu are among companies expected to double-list shares in China.

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