(June 15): Hong Kong stock issuers are looking to boost trading in some stocks suffering from thin volumes, which they say is hurting the ability of companies to access financing through follow-on offerings.
They are targeting more than a thousand companies on the Hong Kong stock exchange, including some based outside the city, with advice on increasing investor coverage, said KC Chan, the head of the chamber of Hong Kong listed companies. A new group of specialists within the chamber will also look to advise companies looking to raise funds in the city, he said.
“While large companies have an army of professional parties, many more firms from abroad would welcome some help when exploring Hong Kong as an market place,” Chan said at a news conference on Friday.
Hong Kong stock listings have continued to boom this year, driven by companies in the artificial intelligence supply chain. With about 400 companies in the pipeline, maiden share sales in Hong Kong are poised to top US$43 billion this year, according to Bloomberg Intelligence, in what would be a six-year high. While the majority of prospective issuers are from mainland China, some companies from the rest of Asia and the Middle East are also lining up.
Among the approximately 2,500 listed firms on the Hong Kong stock exchange, more than 1,000 had a market value of less than HK$500 million, the listing threshold. Most of them trade less than HK$100,000 per day, according to data compiled by Bloomberg.
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About 1,161 firms are valued less than HK$500 million or the listing threshold.
The chamber’s new panel will largely focus on shepherding smaller regional firms even before they list, offering free advice and fostering access to investment bankers, lawyers and auditors.
Companies outside the hottest industries such as AI and robotics often suffer from a lack of market attention, restricting their possibility of getting investment bank coverage, financing options and raises compliance costs, said Alan Fung, a member of the chamber’s expert group.
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As the city’s IPO market has boomed this year, HKEX has grown increasingly frustrated over shoddy IPO applications. To improve transparency the stock exchange suggested naming all lawyers, auditors and consultants when a listing application is returned for substandard work, according to a consultation released mid-March.
The chamber supports market quality and discourages bad actors, Chan said, thus they agree on HKEX’s proposal to hold all parties responsible. Lawyers however opposed the suggestion as it would unfairly penalise advisers for errors out of their control, some of them said.
Earlier this year the stock exchange proposed in the same consultation cutting the market-capitalisation threshold for dual-class listings to boost the city’s appeal as a fundraising hub, while requiring companies to show a “novelty characteristic” in their filing.
While the industry largely supports the relaxation, HKEX should allow flexibility when finalising the rules, according to Chan. The proposed “novelty” definition risks becoming overly restrictive to just a handful of fast-moving innovators, where business models could completely overhaul every few months, he said.
The dual class share regime should focus on helping founders maintain control after successive financing rounds to retain its unique edge, as high market values already serve as sufficient guardrails, Chan added.
Uploaded by Evelyn Chan
