HK-listed Legend chosen for full-convertibility reform

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Legend Holdings will be the first company to pilot China’s full-convertibility reform involving mainland-incorporated companies listed in Hong Kong, the Chinese securities regulator said on Friday.

The China Securities Regulatory Commission (CSRC) first announced the reform in December, saying the so-called H share companies would be allowed to convert their non-tradable equity into free-floating shares.

Chinese mainland companies which listed in Hong Kong have non-tradable shares with convertibility limited only among Chinese-national legal entity, qualified foreign institutional investors (QFII) and strategic investors.

Therefore some large shareholders of these companies are less encouraged to care about the fluctuation of share price and market capitalization.

“The H-share full-convertibility reform is a very important part of CSRC’s opening measures,” CSRC spokeswoman Gao Li told a press conference in Beijing, adding that the reform will be gradually expanded to include other H-share companies.

Under current rules, shares held by founders or major shareholders of Hong Kong-listed mainland firms are not eligible for trading on exchanges.

Legend Holdings, parent of personal computer maker Lenovo Group, is 9 percent owned by National Social Security Fund, a sovereign wealth fund in China.

Although the scheme would potentially increase share supply in the market, which could hurt valuations, analysts say that allowing founders or major shareholders to float their shares could help improve corporate governance.

Source(s): Reuters