(Bloomberg) — Hong Kong is considering easing some listing requirements for large, advanced technology firms that are currently not eligible in an effort to help them meet capital needs for research and development, according to the city’s top financial official.
The Securities and Futures Commission and Hong Kong Exchanges & Clearing Ltd. are reviewing the Main Board listing rules, such as the profit and trading record requirements, and examine to revise them to meet the fundraising needs of “large‑scale advanced technology enterprises,” Hong Kong’s Financial Secretary Paul Chan said in his annual budget speech Wednesday.
Hong Kong is no longer in the top three listing venues globally as a widening crackdown by China on a vast range of industries hit investor sentiment and share prices. Initial public offerings in the Asian financial hub raised $43 billion in 2021, behind both the Nasdaq and New York Stock Exchange as well as Shanghai, data compiled by Bloomberg show.
It marks a drop in ranking from the first half, when the city came third with $31 billion. Shanghai has since pulled ahead, with $58 billion raised in 2021, the data show. Hong Kong was among the top three IPO exchanges worldwide in 2020 after grabbing the top spot in 2019 and 2018.
The SFC and HKEX are in the early stages of exploring whether Hong Kong’s listing regime might accommodate “sizeable pre-profit or pre-revenue companies involved in capital- intensive advanced technology R&D, recognising the risks that arise in relation to businesses which have no or limited sales,” an SFC spokesperson said. HKEX’s Chief Executive Officer Nicolas Aguzin also welcomed the proposal in an emailed statement.
It’s unclear whether the plan, if proceeding, would accelerate listing by some of China’s largest tech firms under regulatory scrutiny. Ride hailing giant Didi Global Inc. was planning to withdraw from the New York Stock Exchange and instead seek a new listing in Hong Kong, a move aimed at allaying concerns over the potential exposure of its data to foreign powers. Didi was placed under a cybersecurity probe and its services were taken off Chinese app stores days after pulling off its $4.4 billion U.S. IPO in June against Beijing’s wishes.
Chan also said a working group formed by HKEX, SFC and the Hong Kong Monetary Authority — the de facto central bank –has completed its feasibility study on allowing yuan-denominated stocks to be traded via the southbound Stock Connect. They will start discussion with mainland Chinese authorities and the Hong Kong government is prepared to support the scheme with measures such as waiving stamp duty on stock transfers paid by market makers to boost liquidity.
(Updates with comments from SFC and HKEX in fifth paragraph.)
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