Alibaba Group Holdings Ltd. and JD.com Inc. led the pack, with the conversions nearly doubling. ADR holders can hand their US shares back to the depository bank to register a conversion, which then swaps them into Hong Kong-listed shares at a set ratio.
“Clearly the ADR delisting risk is the key driver of this liquidity shift,” said Vivian Lin Thurston, a portfolio manager at William Blair Investment Management, referring to the certificates that are equivalents of shares in foreign firms. Recent decisions by global index compilers MSCI Inc. and FTSE Russell to switch to Hong Kong-traded stocks may have also been a catalyst for the surge in demand to swap New York-listed shares of companies including Alibaba and JD.com. Expectation that such firms will eventually be included into stock trading links between Hong Kong and the mainland have boosted their appeal as well.
Still, there are 37 US-listed Chinese companies without a presence on the Hong Kong exchange with a market cap of over $1 billion, including ride-hailing giant DiDi Global Inc. which is mulling an eastward shift, HSBC Holdings Plc. strategists including Herald van der Linde wrote in a note. They have a combined market value of $278 billion.