It might have seemed inevitable that the recent frenzy of flotations would bring with it demand for a relaxation of listing hurdles. The fickleness of the stock market means this window of opportunity might close as quickly as it opened.
The Securities and Futures Commission (SFC) has now agreed in principle to proposals to exempt some larger companies from the three-year track record of profits needed to list on the main board. Instead, some measure of assets and income will be used if companies amass a market capitalisation of at least $2 billion after first-time share issues.
This concession is designed to allow Hong Kong's stock market to attract more and bigger companies. But is this apparent pragmatism only destined to lead to even bigger market busts down the track?
Inevitable parallels will be drawn with the launch of Hong Kong's technology-focused GEM market in 2000, which also pooh-poohed profitability. Then, too, the market was booming and profits seemed old fashioned in the new age of the internet.
To compensate for the omission of a profit forecast in the prospectuses, GEM stocks had to commit to quarterly reporting. But this enforced discipline did not translate into profits.
Last year, 50 per cent of all GEM firms were still unprofitable. Their share price performance was even more disappointing, and investors and prospective new issues now recognise that the GEM market is a place where few fortunes will be made.