HK listing revamp set to draw ‘dozens’ of firms

Three new types of enterprises will qualify to be listed on city’s bourse

Three new categories of enterprises will qualify to be listed on the main board of the Hong Kong Stock Exchange in the wake of the biggest overhaul of its initial public offering rules in two decades as part of efforts to lure prominent new economy companies to its fold.

Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing, which runs Asia’s third-largest bourse in terms of market capitalization, predicts that the number of companies seeking a flotation in the SAR under the new listing structure would be “in the dozens”.

The much-awaited revamp, approved by HKEx on Tuesday to broaden the city’s listing regime, will come into effect on Monday, April 30. Enterprises eligible to be listed on the main board of the city’s stock exchange following the restructuring will comprise those with a dual-class shareholding structure or weighted voting rights; biotechnology companies that have yet to rake in revenue; and companies that are already listed overseas and plan to seek a secondary listing in Hong Kong.

Li, who has played an instrumental role in getting the new rules off the ground, said on Tuesday the first listings following the changes could come in late June or early July this year.

“A large number of companies have told us they’re ready to apply,” he said. “I think they’re just waiting for the new rules announced today.”

Li said he wouldn’t like to speculate on the number, but added: “I think we’re not talking about single-digit numbers. We’re talking about numbers that are, potentially, in the dozens. Hopefully, before summer, we could see at least a number of companies being able to gain access to the market.”

“I believe more companies will list under the biotech chapter. But, the scale of applicants with a dual-class shareholding structure will be larger,” he said.

The overhaul comes on the heels of the Chinese mainland’s decision last month to launch the Chinese Depository Receipt as part of efforts to further open up the capital market, encouraging companies that are listed abroad to return to the mainland’s A-share market.

But, Li rejected concerns that the mainland’s move would pose a threat to Hong Kong, saying there would be opportunities instead for enterprises wishing to list on the mainland.

HKEx said it received 283 responses during the consultation period, most of which backed the revamp, while several amendments were made to the proposed rules.

Following the consultations on the listing reforms, the exchange proposed that applicants seeking a flotation under the biotechnology chapter must have a minimum market capitalization of HK$1.5 billion at the time of listing.

For companies with a dualclass shareholding structure, the corporate governance committee is required to be made up entirely of independent non-executive directors.

In addition, applicants under the secondary-listing chapter need to have been listed on a qualifying exchange, including the New York Stock Exchange, Nasdaq and the London Stock Exchange’s main board for at least two financial years with a required market capitalization of at least HK$10 billion.

A large number of companies have told us they’re ready to apply ... they’re just waiting for the new rules announced today.” Charles Li Xiaojia,