This July 4, 2018 photo shows the bronze bull sculptures outside the Hong Kong Stock Exchange building in Central, Hong Kong. (CALVIN NG / CHINA DAILY))
SHENZHEN/HONG KONG – The Hong Kong Stock Exchange said on Friday that it will relax listing rules effective March 31 in a move to attract more “specialist technology” companies to list in the financial hub.
According to the city’s bourse operator, a new chapter will be added to its main board listing rules, allowing pre-commercial companies with at least HK$10 billion ($1.27 billion) in market value to sell shares, down from the previous threshold of HK$15 billion.
For commercial companies, a market value of no less than HK$6 billion will be required for making initial public offerings in the city, compared with the previous requirement of HK$8 billion.
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The move is part of Hong Kong’s broader efforts to entice more technology firms to come to the city, and to consolidate Hong Kong’s standing as a global financial center.
The bigger picture and impact of the introduction of this regime is that it will invigorate the liquidity of Hong Kong’s capital market and create a more competitive exchange internationally.
Virginia Lee, Partner, Clifford Chance Hong Kong
“This is an exciting new development for Hong Kong’s equity markets. The new-economy sector is rapidly changing the way in which we live and work, and this new route to market will support some of the most innovative and progressive companies of the future,” HKEX Chief Executive Officer Nicolas Aguzin said in a statement on Fri day.
“For these pre-profit and also pre revenue companies, it will significantly increase access to capital to fund their research and development and shape a path to commercialization,” Clifford Chance Hong Kong Partner Virginia Lee noted.
“The bigger picture and impact of the introduction of this regime is that it will invigorate the liquidity of Hong Kong’s capital market and create a more competitive exchange internationally. This initiative also aligns with the Hong Kong government’s broader efforts to strengthen the city’s status as a leading global financial center,” she added.
Melody Lai, chief strategist at China Renaissance Securities (Hong Kong), said: “We expect Hong Kong to become a more attractive listing destination for technology-focused and growth companies.”
“With the rising proportion of new-economy stocks, this could help increase the overall representativeness of the Hong Kong stock market, to enjoy a valuation premium with stronger liquidity flow, drive higher turnover, and enhance diversity.”
The chief strategist argued that Hong Kong will likely be a more convenient listing venue and a preferred destination for Chinese companies’ American depositary receipts’ homecoming as these firms can mitigate potential risks associated with scrutiny from a single stock exchange, while also paving the way for them to capitalize on higher valuations and superior returns in their home market.
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According to the latest Global Financial Centres Index, jointly published on Thursday by London based think tank Z/Yen and Shenzhen-based think tank China Development Institute, Hong Kong maintains fourth place globally, one place behind Singapore.
HKEX’s stock price closed at HK$342 per share on Friday.
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