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Reactions mixed as HKEx pushes GEM firms to move to main board

The Hong Kong Exchanges and Clearing's proposal to encourage companies listed on the Growth Enterprise Market to shift to the main board has received mixed reactions from issuers.

As part of the move to reform the poorly performing GEM, the exchange two weeks ago released a consultation paper to encourage the 194 companies listed there to shift to the main board if they had made HK$50 million profit in the past three years and had a market cap of HK$200 million.

Companies must list on the GEM for at least two years before applying for the shift. To encourage GEM companies to apply to list on the main board, the exchange cut the initial listing fee by half, simplified listing procedures and waived the need for a sponsor.

The exchange idea is to turn the GEM into a stepping stone to the main board.

CIG Yangtze Ports Capital has been listed in the GEM for two years but it has not yet met the profit requirements of the main board. CIG chairman Edward Chow Kwong-fai however said he had no intention of listing his company on the main board even if it met the profit requirements in the future.

'If my company would shift to the main board, it will be only a small fish swimming in a big pool which is hard to get the attention of the investors. I would rather my company to be a relatively big fish in a small pond,' he said.

He said Microsoft and Intel also remained listed on the Nasdaq after their businesses grew.

'I want to follow the examples of Microsoft and Intel to stay on. My company is able to raise funds in the GEM and I think I should stay on to support the market instead of abandoning it,' he said.

Mr Chow believes as long as his companies perform well, investors will trade their shares no matter whether they are listed on the main board or the GEM.

But some companies welcome the exchange move and want the shift.

GEM-listed financial company Value Convergence Holdings president and vice-chairman Lawrence Ho Yau-lung said his company would consider such a move. 'Corporate governance and creating the most value for our shareholders is of utmost important to us. If moving VC to the main board creates more value for our shareholders, which seems to be an obvious case, then we would definitely consider it,' he said.

Another GEM company Eco-tek Holdings applied to list on the main board in May last year but gave up the plan four months later due to the complicated procedure. The application cost the company HK$3 million in professional fees.

Eco-teck Holdings chairman Shah Tahir Hussain said his company would consider applying again to list on the main board if the exchange went ahead with the GEM reform proposals.

'We agreed that the existing procedures for applying for the transfer to the main board are too costly and complicated and most of the works are duplicated. It affects the existing shareholders' interests and discourages GEM listed issuers to apply for such transfers even though they have met the stated requirements of the main board,' Mr Hussain said.

'Overall, we agree with the proposed GEM reform proposals as they help the reduction of huge professional expenses in the application of the main board. But all the stated rules and their applications should be very clear.'

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