* Legend Holdings picked in H-share full-convertibility reform
* Reform to expand gradually - CSRC
* reform potentially increases share supply, improves governance (Adds quotes, background)
BEIJING/SHANGHAI, April 20 (Reuters) - Legend Holdings will be the first company to pilot China’s full-convertibility reform involving mainland-incorporated companies listed in Hong Kong, the Chinese securities regulator said on Friday.
The China Securities Regulatory Commission (CSRC) first announced the reform in December, saying the so-called H share companies would be allowed to convert their non-tradable equity into free-floating shares.
“The H-share full-convertibility reform is a very important part of CSRC’s opening measures,” CSRC spokeswoman Gao Li told a press conference in Beijing, adding that the reform will be gradually expanded to include other H-share companies.
Under current rules, shares held by founders or major shareholders of Hong Kong-listed mainland firms are not eligible for trading on exchanges.
Legend Holdings, parent of personal computer maker Lenovo Group, is 9 percent owned by National Social Security Fund, a sovereign wealth fund in China.
Although the scheme would potentially increase share supply in the market, which could hurt valuations, analysts say that allowing founders or major shareholders to float their shares could help improve corporate governance. (Reporting by Samuel Shen, Zhang Xiaochong and John Ruwitch; Editing by Kim Coghill)