Chinese regulators are throwing cold water over Hong Kong’s plan to cash in on China’s tech boom. Shanghai and Shenzhen stock exchanges  announced this weekend that Hong Kong-listed shares with dual-classes — including smartphone maker Xiaomi — would not be eligible for a connecting trading scheme. Shares in Xiaomi fell 10 per cent before recovering. Private Chinese tech groups may want to rethink Hong Kong IPO plans.

Shanghai and Shenzhen’s exclusion puts a cap on values for such stocks. Xiaomi’s expected valuation was cut in half after it abandoned plans to issue Chinese Depositary Receipts, traded on a Chinese stock exchange. If mainland investors cannot buy companies like Xiaomi via stock-connects then prices will come under further pressure.

Xiaomi’s share price move is collateral damage in a broader struggle. Hong Kong is trying to secure its place alongside China’s increasingly mature stock market. It has  loosened governance principles to allow listings with weighted voting rights in an attempt to attract Chinese tech companies unable to list on mainland exchanges. Delivery group Meituan-Dianping and taxi company Didi Chuxing were lined up for IPOs in the second half of this year.