Exchange's new Gem to be cut and polished by late next year
The stock exchange yesterday renamed its proposed second board the Growth Enterprises Market (Gem) and said it would launch it in next year's fourth quarter.
The exchange said it was looking for 20 to 30 high-quality companies to form the first batch of listings.
'We have to find very high-quality companies,' Lo Ka-shui, chairman of the Gem working group, said.
'They will establish the reputation of the Gem. Failures in the early phase would be disastrous for future growth.' The Gem will have lower listing requirements but tougher disclosure requirements than the main board, aiming to allow medium-sized enterprises to raise funds.
Mr Lo said companies from the mainland, Taiwan and Hong Kong had expressed interest, including hi-tech companies, manufacturers and service companies.
The exchange might allow Gem trading in US dollars subject to further study, Mr Lo said. He said Taiwan had 40,000 mainland projects valued at US$40 billion, many of which needed to raise capital in Hong Kong as the island's second board banned companies from raising funds for mainland projects.
There were 280,000 small to medium-sized enterprises in Hong Kong needing funds for expansion. The US$8.8 billion of venture-capital funds managed in Hong Kong also needed an outlet.
There were eight million mainland enterprises, including 20,000 hi-tech companies and 500,000 joint ventures which would be possible listing candidates, Mr Lo said.
Mr Lo hoped to complete the drafting of the rules and trading mechanism of the new market within eight to 10 months.
The exchange has set up a separate team of staff, headed by Frankie Kan, to handle listing affairs for the new market.
Listing chief Lawrence Fok Kwong-man was promoted to senior executive director (regulatory affairs), responsible for both the main board and the Gem, plus supervision of all broker members.
Unlike the main board, Gem companies need no profit record - only a two-year track record in their line of business. Conglomerates and investment companies will not be allowed.
The minimum public float will be 10 per cent of the issued share capital or HK$30 million: whichever is higher.
Listing sponsors will be responsible for vetting the initial public offerings (IPO) of Gem firms.
Companies will have to submit quarterly reports, with penalties for non-compliance. The exchange plans to seek statutory backing for the listing rules, adding teeth to regulation of both the main board and the Gem.
To save costs for Gem companies, underwriting is not compulsory for the IPO.
Companies will be able to make announcements through the exchange's Web site instead of by paid advertisement.
In other moves, the exchange said it had set up a working committee to study the impact of the Securities and Futures Commission's proposed insurance-based investor compensation scheme.
It also said it would set up a standing committee to advise and guide council members after it becomes a public body under the anti-bribery ordinances.
