Brokers and investment bankers could support the share price of a new listed company under a Securities and Futures Commission (SFC) proposal.
This would be a big change for the SAR market as such a practice is now illegal and considered market manipulation.
The SFC proposal is intended to make it easier for companies to raise funds in Hong Kong through initial public offerings (IPOs).
A consultation paper issued by the SFC yesterday said investors would feel more comfortable subscribing to new shares if they knew someone could support the share price of a company in a regulated way shortly after the listing.
The change is an attempt by the SFC to bring Hong Kong more in line with international markets. Price stabilisation for IPOs operates in the US, Britain and Singapore.
Under the SFC proposal, price stabilisation would be allowed only for new listings with a public offering of more than HK$200 million.
The company would have to appoint a broker or bank to act as a stabilising manager to carry out the support activities. The manager would need to keep trading records of the stabilising activities for seven years for SFC inspection when required.