FAST NEWS: Clover Bio slumps after booting from China-Hong Kong Stock Connect

The latest: The Shanghai and Shenzhen stock exchanges removed Clover Biopharmaceuticals Ltd. (2197.HK) from their list of securities eligible for trading in the Hong Kong-China Stock Connect program, as part of a regular adjustment. The move means investors in Shanghai and Shenzhen will no longer be able to use the program to buy the stock, but only to sell it.

Looking up: Making the stock unavailable to Mainland Chinese investors through the Connect Program may reduce its volatility in the future, giving the share price more stability.

Take Note: The company’s removal from the program will shrink its investor base and trading volume, since Mainland Chinese investors can no longer buy the stock.

Digging Deeper: The China-Hong Kong Stock Connect program allows mainland investors to trade in designated Hong Kong stocks, with the list of eligible securities adjusted regularly. Hong Kong stocks belonging to the Hang Seng Composite SmallCap Index become ineligible for the program if their average end-of-month market capitalization in the 12 months prior to each adjustment is less than HK$4 billion ($513 million). Clover’s share price has fallen steadily since the end of last year, reducing its market capitalization to just HK$1.5 billion as of Monday. Accordingly, its removal from the connect program has been widely anticipated.

Market Reaction: After plunging 17.1% on Tuesday, Clover’s shares continued to fall on Wednesday. They closed down 4.1% at HK$0.93 by the midday break, touching a new 52-week low.

Translation by A. Au

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