Hong Kong Exchanges and Clearing has warned that the unfolding global credit crunch is hurting the finances of listing candidates and advised investment banks to bolster their disclosure to investors. Richard Williams, head of the HKEx's listing division, in a letter to investment banks said that poor market sentiment had created difficulties for listing candidates as they tried to obtain loans to finance operations. Mr Williams reminded the banks to keep an eye on their listing-bound clients, citing the recent deterioration in financial markets and tightened monetary policy on the mainland. The US subprime lending crisis hit the global market for initial public offerings at the beginning of the year, with eight share sales pulled in Hong Kong so far this year. 'Recent experience suggests that it is appropriate to issue a reminder about the applicable disclosure standards and further guidance on its expectations,' Mr Williams said. 'Sufficient information should be given to potential investors to enable them to make a properly informed assessment of an issuer.' He said that all new listing applicants were required to include in their listing document a statement on working capital, as well as accurate information about their indebtedness, liquidity, financial resources and capital spending. According to existing rules, companies that plan to sell shares in Hong Kong must file before their listing a working capital statement for the next 12 months, along with details of borrowings, indebtedness, mortgages, contingent liabilities and guarantees. According to an investment banker who received the letter, regulators were becoming more protective of the market because of the current poor sentiment. 'Look at what the United States, the world of free capitalism, is doing,' the banker said. 'It is intervening in the market daily, whether it is rewriting the rule book on Freddie Mac and Fannie Mae or opening the discount window.' Some bankers suggested the HKEx's warning was designed to minimise the chance of listing candidates using proceeds from their offering to pay back debt. Another banker said the HKEx was being over-anxious on the issue, given that banks already had a legal obligation to disclose risks to investors. 'When we sign a memorandum of understanding for a new listing, there is legal liability for us to bear. It is our job and responsibility,' the banker said. 'I think it is reasonable for a firm to use the proceeds for debt repayment if it has clearly specified that in the listing document.'