Hong Kong exchange delays plans to allow companies to hold weighted…

HONG KONG (Reuters) – The Hong Kong exchange operator said on Wednesday it would delay changes that would allow companies to hold shares with more voting rights, as more time was needed for investors to become accustomed to recent rule changes.

Hong Kong Exchanges and Clearing (0388.HK) (HKEX) said it would not launch a consultation proposing to allow companies to hold weighted voting rights (WVR) as had been planned as part of measures to lure large tech companies to list in the city.

In April, HKEX changed its rules to allow companies with weighted voting rights – also know as dual-class shares – to list in the city, as part of a broader shake-up of the listing regime.

Both the initial change and its extension have been controversial topics in the Asian financial hub, with some critics arguing that by undermining the principle of “one share one vote” they privilege certain shareholders over others.

Ownership of WVR shares has so far been limited to company founders and does not include companies. The HKEX had said it planned to launch a separate consultation by July 31 to consider extending weighted rights to companies.

However on Wednesday it said it needed to discuss the matter further with stakeholders to develop a broader consensus.

Some Hong Kong market participants fear that the first rule change does not go far enough to attract listings to Hong Kong. Hong Kong’s listing reforms have come as the city jostles for the top global IPO venue crown with New York and China.

Chinese internet giant Tencent (0700.HK) is seeking to list its online music unit in the United States, in part because weighted voting rights extend to companies there.

However, others argue that extending the rights to companies would do further damage to Hong Kong’s corporate governance standards.

Jamie Allen, secretary general of the Asia Corporate Governance Association, said the safeguards the exchange had brought in to protect investors after the rule change were weak and hard to enforce.

“Extending WVRs to corporates would mean WVR in perpetuity,” he said at a press conference on Tuesday.

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