White Collar

Listing reforms debate rages on, dividing HK’s financial community

Two sides up the ante, as turf war intensifies

PUBLISHED : Monday, 15 August, 2016, 6:37pm
UPDATED : Monday, 15 August, 2016, 10:09pm

“It was the best of times, it was the worst of times...”

So wrote Charles Dickens at the opening of A Tale of Two Cities.

And the great man’s famous line could be perfectly used to describe the timing of the controversial new listing reforms for the Hong Kong stock market, which are now splitting opinion across the financial community.

The consultation is aimed at streamlining the listing process and communication between the regulators.

But instead it has turned into an ugly turf war between the two main bodies involved, with both sides now gaining heavyweight supporters and detractors, who have begun engaging in daily tit-for-tat verbal volleys at each other.

The consultation basically suggests the creation of two new committees, equally represented by the Securities and Futures Commission and Hong Kong Exchanges and Clearing, to decide on listing policies and complicated listing applications.

From the SFC’s points of view, the new arrangements will allow its involvement in the process at an earlier stage and create a platform which will enhance communication between the securities watchdog and HKEX. Currently it is HKEX and the listing committee that approve new listings and set listing policies, while the SFC has the power to veto applications, and HKEX is happy with the situation.

It has turned into an ugly turf war between the two main bodies involved ...who have begun engaging in daily tit-for-tat verbal volleys at each other

In the HKEX camp are listed companies and brokers.

The latter vehemently oppose the changes, fearing the SFC will use its powers to say no to many more IPO proposals. They say the reforms will result in more regulation, cut the number of new listings, and ultimately slash their income as a result.

On the SFC side, the Hong Kong government has now entered the fray, backing the reforms, adding its considerable clout to the battle.

Just half-way through the three-month consultation, the debate is likely to rage on.

But timing wise, the spat couldn’t come at a worse time, given Legislative Council elections are set to be held in early September.

The listing reform proposal has already sucked in three high-profile candidates who are vociferously opposed to the changes, and is likely to become an ever hotter topic in the weeks to come.

The trio, Christopher Cheung Wah-fung, Ricky Chim Kim-lun and Gordon Tsui Luen-on, have arranged a forum to be held at HKEX, at which they will present their views to representatives from Hong Kong’s 450 brokerage firms.

All three insist the reforms will reduce new listings and hurt turnover.

The number of new Hong Kong listings dropped by 9 per cent to 63 in the first seven months of the year, while total funds raised from IPOs were down 55 per cent to HK$65.43 billion, from HK$144.11 billion.

The average daily turnover also dropped 47 per cent year on year to HK$66.7 billion during the period.

On Monday, Wanda Commercial gained shareholder approval to delist the company from Hong Kong, within a plan to relist in the mainland, where it thinks it will be given a higher valuation.

Many now fear as the listing debate rumbles on, more big names could now be tempted away to the mainland market.

Delistings, a drop off in new listings, falling turnover, means a fall in commission income for stockbrokers. No wonder several hundreds took to social media last week seeking signatures for a petition to oppose the plan.

If the reform suggestions had come last year at this time, when the market was on its strongest bull run in seven years, then brokers would have been too busy to oppose it.

But whatever side you are on, it’s certainly an intriguing time for the stock market.