Future still in doubt for Hong Kong’s ‘quirky’ small-cap exchange, the GEM
‘Not many investors want to trade here. In contrast, it has attracted a lot of speculators. So the result is even fewer companies have wanted to list here’
Hong Kong’s Growth Enterprise Market (GEM) was created 18 years ago with high hopes of changing the lives and fortunes of young Asian technology companies.
Today, the GEM, rather than being the region’s very own Nasdaq, has become home to many quirky things, including the world’s wildest price swings, with only a small percentage of its component companies’ shares actually available to the public to trade.
“Practically, the GEM has failed in its original mission to become a thriving Nasdaq-style stock exchange,” said Vincent Chan, head of China research for Credit Suisse.
“Not many investors want to trade here. In contrast, it has attracted a lot of speculators. So the result is even fewer companies have wanted to list here.”
Set up by the Hong Kong Stock Exchange [now Hong Kong Exchanges & Clearing, or HKEX], officials had high aspirations the GEM would become a magnate for Asian technology startups, a place where emerging companies without proven track records could finance growth, and venture capitalists could achieve successful exits from their investments. That plan, however, hasn’t quite worked out that way.
Practically, the GEM has failed in its original mission to become a thriving Nasdaq-style stock exchange
In May 2017, average daily turnover for the GEM was HK$742 million, under 1 per cent of the main board’s daily average for the same months – that’s even lower than when it was launched with great fanfare in November 1999