HKEX to push ahead with reforms and more product diversity as it targets new economy issuers amid tougher funding environment
- HKEX responds as market participants push for a loosening of listing rules amid a tougher funding environment
- HKEx to look at ways of catering to the funding needs of early stage, large-scale advanced technology companies, says CEO Nicholas Aguzin
Hong Kong Exchanges and Clearing (HKEX) is moving ahead with efforts to diversify its mix of products, targeting the new economy sector and particularly biotech companies, as market participants push for a loosening of listing rules amid a tougher funding environment.
The bourse operator will continue to implement more reforms and look for ways to cater to the funding needs of large-scale advanced technology companies, which are at an early stage of product commercialisation, said chief executive Nicolas Aguzin at the HKEX Biotech Summit 2022 on Thursday.
“We’re also considering the creation of a bespoke chapter for them, and we also want to continue expanding the type of companies that are listing in our markets,” said Aguzin.
The upcoming reforms are expected to be the biggest since 2018, when the HKEX allowed technology firms with multiple classes of voting rights and pre-revenue biotechnology firms to list.
Around half of the over 200 companies newly listed in the city since the implementation of the 2018 regime have been from the healthcare sector, Aguzin said on Thursday, and they raised close to US$260 billion during the period.
HKEX also intends to issue a variety of new products such as exchange traded funds (ETFs), risk management products for investors to hedge their exposure, and to further develop the derivatives market, said Aguzin. He added HKEX wants to create a vibrant ecosystem and enrich market liquidity.
The developments, which were foreshadowed in Financial Secretary Paul Chan Mo-po’s 2022-2023 budget, come as the government and the HKEX both work to revive the city’s initial public offering market.
Hong Kong, which was the world’s top IPO market seven times in the past 13 years, fell to 10th place in the global IPO ranking in the first half of 2022 in terms of funds raised. This is the bourse’s lowest position since the first half of 2002 when it was placed 20th, Refinitiv data shows.
Twenty-two companies raised US$2.3 billion from stock sales to new investors in the first half, the lowest since the same period in 2003 yielded US$802.3 million, according to Refinitiv data.
HKEX’s move comes after market participants called for a lowering of the benchmark for innovative companies.
“With next year being the 5th anniversary of the Chapter 18A [the 2018 rule], perhaps loosening the rules a bit, some of the market tests in terms of clinical advancement, the overseas server rule, and risk management [is needed],” said Vijay Karwal, chief financial officer at AffaMed Therapeutics.
“Some companies with the most innovative and groundbreaking technology can be unnecessarily constricted, and you [Hong Kong] are frankly forcing them to go to Nasdaq.”
Other speakers at the HKEX event said that funding difficulties are increasing, with some companies embarking on cost cuts.
The Hang Seng Biotech Index was down 58.4 per cent from its peak on June 28, 2021 as of Thursday’s close in Hong Kong. The index has, however, also been dragged lower by a broader market decline amid slowing economic growth, rising geopolitical tensions and weak investor sentiment.