THE stock exchange's proposals to tighten its listing requirements has drawn a mixed reaction from Hong Kong's corporate finance community. Supporters argued that if approved the proposed changes would establish proper guidelines and screen out applicants lacking credible track records. But those in the opposite camp claimed the proposals were misguided and the stock exchange was moving away from its role to provide capital to both small development companies and large firms. Corporate Finance Associate Secretariat William Woods said the newly formed organisation was concerned by the proposals and the philosophy behind them. ''The problem is that the mission of the exchange is to promote capital formation in Hong Kong and yet this proposal would effectively exclude many companies from the market,'' he said. Mr Woods added that the CFA planned to submit a formal response to the stock exchange within the next month. Given the political sensitivity of the underwriting process, Mr Woods was the only official involved in the corporate finance sector who would comment on the record. The proposals would require new listing applicants which did not have market capitalisation of $400 million to meet attributable profit requirements of $25 million in the most recent fiscal year and an aggregate of $35 million in the two previous years. The $400 million market capitalisation figure is double the existing requirement, which stipulates listing applicants must issue a minimum public float of 25 per cent and float value of $50 million. Corporate finance officials said if the proposals became part of the stock exchange's listing rules it would reduce the number of new issues by 50 per cent. If the proposals were already in place, an official said 90 issues over the past three years would have been ineligible to list in Hong Kong. One of the biggest complaints about the proposals was that the stock exchange was using the listing requirements of the New York Stock Exchange as a model without taking into account the fact that Hong Kong did not have a second board such as the American Exchange or NASDAQ for smaller companies. There was also criticism that the exchange was responding to complaints from investors about newly listed companies which were unable to sustain their profits or traded below their issue price in the after-market. ''What the exchange seems to be mixing up is every company that lists has to be an amazing success,'' an executive said. ''They have to accept there will be failures and scandals, so just because companies have poor performances in the after-market, they have to be excluded from listing.'' Herbert Hui Ho-ming, head of listings at the exchange, said the new proposals were prompted by suggestions from the market. ''We're not saying this is the way forward. We're saying they might be useful,'' he said. Mr Hui said the measures would see fewer companies come to the market but added that they were introduced in the wake of complaints from investors that the exchange was listing too many small companies. ''Now is the time for the market to put up or shut up,'' he said. ''If they constantly say we're not listing big companies, I'm saying here's a proposal that will satisfy them.'' The idea of a second-tier board for smaller companies was addressed in the stock exchange's recent strategic plan. ''It was felt the priority should be given to improving standards ,'' it said. If the current proposals were in place on January 1, 1994, at least 14 of the 23 initial public offerings launched this year would have been rejected by the stock exchange.