HKEx mulls listing bar for poor operators
Companies that post several years of losses or whose share price falls to a rock-bottom level could lose their listing under a proposal from Hong Kong Exchanges and Clearing.
HKEx chief executive Kwong Ki-chi said the exchange next month would issue a consultation paper outlining new conditions that would make it easier to delist poorly performing companies.
Analysts said if the HKEx implemented its proposals many under-performing stocks would be kicked off the main bourse, improving the quality of the exchange.
The move would help the HKEx deflect criticism that it has failed to ensure the quality of listed firms.
Under present rules, companies can be delisted if they have no business operations and have been suspended from trading for up to two years.
There are 13 companies still listed on the exchange, which have already been suspended for more than three months. But the exchange says its hands are tied by the two-year rule.
Mr Kwong said the rules made the process of delisting poorly performing companies too difficult and slow.
'We want to speed up the process and to shorten the delisting process to about six months to a year,' Mr Kwong said.
The soon-to-be-released paper suggests the introduction of two new criteria to determine whether a company should be removed from the bourse.
One of the suggestions takes its lead from the US high-technology exchange, Nasdaq, and would mean that a company trading at less than US$1 for 30 days continuously would lose its listing.
The exchange will consult the public on what price the delisting threshold should be set.
'We could not set the threshold too high or a lot of smaller companies would automatically be delisted,' he said.
The proposals also include a suggestion to follow the example of China, where companies that suffer three years of consecutive losses are automatically delisted.
Under present listing rules, the HKEx will accept a listing application only if a company can prove it has three consecutive years of profit and earned at least HK$60 million in the three years prior to listing.
'We require companies to make profit for three years to qualify for a main board listing. But we know that when a listed company fails to make earnings for several years, they are no longer as fit as they were at time of their listing application,' Mr Kwong said.
He rejected suggestions that the HKEx should set up a separate platform for small shareholders to dispose of shares in companies that have been delisted.
Mr Kwong said it would be necessary for investors to dispose of their shares ahead of the delisting.
He also said that if the HKEx allowed investors to dispose of shares in delisted companies on a separate exchange-run platform, it would give investors the idea that the exchange continued to regulate the companies.