You may want to get your hands on some Alibaba stocks.
However, you realise that there are 2 different Alibaba stocks on different exchanges!
Are these stocks the same and how do they differ?
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The difference between BABA and 9988
BABA is an ADR listed on the NYSE, while 9988 is listed on the HKEX. They are both shares of the same company (Alibaba Group), but differ in the currency they trade in and the minimum number of units to invest in.
Moreover, it is possible for you to interconvert between these two stocks. The current conversion rate is one share of BABA is equal to 8 shares of 9988.
Here’s what you need to know between these 2 stocks:
They are different listings
The Alibaba stock (BABA) was first listed on the New York Stock Exchange (NYSE) in September 2014.
The initial public offering (IPO) holds the record for the largest global IPO of all time, at $25 billion!
There are 3 possible reasons why Jack Ma chose to list his company on the NYSE instead of on the HKEX or the China Stock Exchanges, such as:
- Range of motion
To raise a further $20 billion, Alibaba had a secondary listing on the HKEX (9988) in late 2019.
This was the second IPO that Alibaba had, but on another exchange instead.
There was a change in the HKEX’s regulations. This allowed Chinese companies to be secondarily listed on the HKEX if they met some conditions:
- Companies involved in ‘innovation’
- ≥ 2 years of listing status on the NYSE / Nasdaq, or premium listing on the LSE
- A market cap of ≥ HK$10 billion
Alibaba was able to qualify for this secondary listing. They managed to raise at least $11 billion for this IPO!
As such, BABA was listed earlier in the NYSE (2014), while 9988 is a secondary listing on the HKEX (9988).
The stocks are on different exchanges
BABA is on the NYSE, while 9988 is listed on the HKEX. This has some differences in their stocks:
BABA is traded in USD, while 9988 is traded in HKD.
Depending on your home currency, you may be exposed to exchange rate fluctuations!
Minimum units to invest
On the NYSE, you can trade a minimum of 1 unit of BABA.
However, the minimum lot size for 9988 is 100 units!
If you convert the cost of buying 1 lot of 9988 stocks to USD, it’ll cost around $3.3k USD! In contrast, you can buy one BABA stock at around $250 USD.
This may make the BABA stock slightly more accessible for you, especially if you only have a small sum to invest.
Different trading hours
The trading hours for the NYSE and HKEX are quite different:
|Trading Hours||2230-0500||0930-1200 |
Both timings are taken with reference to GMT +8.
The timings which you can trade both stocks are quite different. You’ll need to decide which timing will be more suitable for you!
Different commissions charged
Depending on which broker you choose, you may be charged different commissions when you trade on the NYSE or the HKEX.
Here are the commissions that you’ll be charged when you trade with different brokers:
|Broker||BABA Rates||9988 Rates|
|Tiger Brokers||0.01 USD/share |
Min 1.99 USD/trade
|0.06% * trade value |
Min 15 HKD/trade
|FSMOne||0.08% * trade value |
Min USD 8.80
|0.08% * trade value |
Min HKD 50
|Saxo||0.06% * trade value |
Min USD 4
Min HKD 90
|Standard Chartered||0.20% |
Min USD 10
Min HKD 100
|DBS Vickers||0.15% |
Min USD 18
Min HKD 80
It seems that Tiger Brokers provides one of the cheapest commissions!
Type of holdings
When you purchase the 9988 stock on the HKEX, you have a direct ownership in the Alibaba Group.
However, things are quite different for the BABA stock. When you buy the BABA stock, you are buying into an American Depositary Receipt (ADR).
ADRs are a US security which represents the ownership of shares in a foreign company.
These ADRs can be traded freely just like any other stock.MoneySense
You can see that you’re buying into an ADR when you buy the BABA stock, based on the ticker name.
Unlike other ADRs, the BABA stock is actually a variable interest entity (VIE).
A variable interest entity (VIE) refers to a legal business structure in which an investor has a controlling interest despite not having a majority of voting rights.Investopedia
As such, you may not have an ownership of Alibaba Group when you purchase the BABA stock!
Both stocks are fully fungible
BABA and 9988 are fully fungible stocks.
Fungible investments can be bought and sold on multiple exchanges.The Balance
This means that you are able to buy the BABA stock and sell it on the HKEX as 9988, or vice versa!
Here is the official conversion rate of these 2 stocks: 1 BABA stock on the NYSE is equivalent to eight 9988 shares on the HKEX.
You’ll need to find a broker that gives you access to both the NYSE and HKEX.
This is what you’ll need to do to interconvert these 2 stocks (based on Alibaba’s prospectus):
- Sell BABA to Citibank depositary bank, and receive the corresponding number of 9988 shares
- Sell 9988 to Citibank Hong Kong, and receive the corresponding number of BABA shares
However, you will be exposed to 2 kinds of risks during this interconversion:
- Price fluctuations of both stocks
- Exchange rate fluctuations between HKD and USD
Moreover, all the costs of this interconversion will be borne by you. You’ll need to decide if the costs are worth converting between these 2 stocks!
How do I go about interconverting between BABA and 9988?
There are some brokers which will help you to facilitate the conversion. One such broker is Interactive Brokers.
Here are some fees that you’ll incur when you do this interconversion:
- Conversion fee (US 0.05 per share)
- USD 500 processing fee
It can be rather costly to carry out this conversion!
Threat of delisting
Due to the China-US tensions, a new law (Holding Foreign Companies Accountable Act) was passed by Donald Trump.
This law bans Chinese stocks from being traded in the US exchanges for 3 years, if they failed to meet auditing requirements.
This Act coincided with Luckin Coffee being forced to delist from the Nasdaq!
There were fears that BABA will get delisted from the NYSE as well. However, there are no confirmation that BABA may be delisted or not.
Even so, there is still some risk that you may have when you own BABA stocks! You will not have this risk if you own the 9988 stock instead.
Here is a comparison between BABA and 9988:
|IPO||Sep 2014||Nov 2019|
|Minimum Units to Invest||1||100|
|Type of Holding||VIE||Full stock|
|Threat of Delisting||Present||Absent|
So which stock should you choose? Here are some points you may want to consider:
#1 Minimum investment amount
The minimum lot size for 9988 is 100 units, which can cost you a few thousand USD. Furthermore, you are only able to trade in multiples of 100 units.
You will need a larger amount to invest in 9988, while you only need a few hundred USD to buy BABA!
If you only have a small amount to invest, BABA may be more accessible for you.
#2 Type of stock you want to own
BABA is only a VIE, which means that you are not a full stock owner of Alibaba Group. As such, you may only have limited claim to the company’s actual assets.
There may be much more risks involved when you invest in BABA compared to 9988!
Both BABA and 9988 are shares of the same company: Alibaba Holdings. There are greater risks involved when you invest in BABA.
As such, you’ll need to decide if the risks are worth the lower minimum prices for the BABA stock!
Alternatively, you can invest in Alibaba through a Hang Seng Tech ETF or a Hang Seng Index ETF. Alibaba has quite a high weightage in both ETFs, which gives you quite a bit of exposure to the stock!