Revised listing rules to boost Hong Kong market

With secondary listing regulations revised in Hong Kong, the local stock market will be more dynamic and the city's role as a key financing venue will be further consolidated, market experts said.

The Stock Exchange of Hong Kong Ltd, a wholly owned subsidiary of Hong Kong Exchanges and Clearing Ltd (HKEX), announced on Friday the exchange's revised listing regime.

For Chinese issuers without a weighted voting rights (WVR) structure, those non-innovative ones will be allowed for secondary listings after the revised regime takes effect next year.

The minimum market cap will also be lowered. Chinese issuers without a WVR structure can seek a secondary offering if their market cap reaches $3 billion or they can demonstrate a track record of good regulatory compliance of at least five financial years on a qualifying exchange such as the Nasdaq.

For those with a market cap of $10 billion, the compliance period will be shortened to two full financial years.

At present, such secondary applicants to the Hong Kong exchange must see their respective market cap reach $40 billion at the time of listing. If not, a minimum market cap of at least $10 billion combined with a minimum $1 billion in revenue for the most recent audited financial year can suffice.

The revised listing regime also said that Chinese issuers primarily listed on a qualifying exchange before Dec 15, 2017, and overseas Chinese issuers eligible for a secondary listing with their WVR and/or variable interest entity structures, the latter of which is widely adopted by Chinese technology companies, may opt for a dual primary listing on the exchange.

The amended listing rules will take effect from Jan 1.

"This new framework will support a whole new generation of international and regional issuers seeking a listing in Hong Kong. It will help facilitate orderly and efficient listing for the strong pipeline of applicants seeking secondary listings, those looking to return to Asia as a home market, and those exploring an IPO for the first time," said Bonnie Y Chan, head of listings at HKEX.

Edward Au, Deloitte China southern region managing partner, said if the revised listing regime lives up to market expectations, it will strengthen Hong Kong's role as a key financing platform and facilitate the sustained development of its stock market.

Professional services provider KPMG said most of the US-listed Chinese mainland electric vehicle makers have finished a secondary offering in Hong Kong by the third quarter. These EV makers have raised about HK$29.5 billion ($3.8 billion), accounting for 10 percent of the total financing raised at the Hong Kong exchange over the past three quarters.

Hong Kong's financial market, as well as its entire capital market, will be boosted with more secondary listings. This has demonstrated Hong Kong's solid financial foundation, importance as an international financing market, and the well-established ecosystem which can support the development of innovative companies, said KPMG experts.

Industry leaders have been actively seeking a secondary offering in Hong Kong this year. Microblogging service provider Weibo filed a draft prospectus with the Hong Kong exchange on Thursday to seek a secondary listing. The mainland's largest online travel agency Trip.com completed its secondary offering in Hong Kong on April 19 and video-sharing platform Bilibili on March 29.

Secondary listings in Hong Kong are a major theme in the market this year as more investors are attracted by the higher regulatory and financing efficiency in Hong Kong, said Mandy Zhu, head of China operations for global banking at UBS Investment Bank AG.