Hong Kong stock exchange issues new listing requirements, plans to implement reforms in February

Hong Kong Exchanges and Clearing, the bourse operator, says companies must have a minimum market capitalisation of HK$500 million

PUBLISHED : Friday, 15 December, 2017, 9:07pm
UPDATED : Friday, 15 December, 2017, 11:03pm

The stock exchange has set the bar higher with its minimum listing requirements for companies eyeing the main board and will implement most of the proposed reforms for its second board in February, the Hong Kong Exchanges and Clearing (HKEX) announced in a statement on Friday.

Charles Li Xiaojia, chief executive of HKEX, the bourse operator, said in response to a media enquiry, that the change was aimed at improving the quality of listings.

Companies that want to list on the main board must have a minimum market capitalisation of HK$500 million (US$64 million), up from the current level of HK$200 million. The minimum public float value has also been increased to HK$125 million from HK$50 million.

The listing requirements on the second board, Growth Enterprise Market (GEM) have also been raised.

Companies must have a minimum market capitalisation of HK$150 million, up from HK$100 million, while the minimum public float has also been lifted to HK$45 million from HK$30 million.

“Both the main board and GEM minimum market capitalisation will be increased,” Li said.

“After the reform, the GEM will no longer be a stepping stone for companies to upgrade to the main board. The GEM will have its own role as an SME board for quality small and medium size companies to raise funds.”

After two months of consultation from June to August, the HKEX, the operator of Hong Kong stock market, received 100 responses with a majority supporting the reform. As a result the HKEX said it would go ahead and implement the rules changes from February 15.

HKEX also said it would raise the minimum annual cash flow of GEM applicants to HK$30 million from HK$20 million.

It also requires GEM participants to offer at least 10 per cent of its shares in the form of an initial public offering. The current rules stipulate that they can be done by private placement.

The lock-in period for controlling shareholders on the GEM will also be extended to two years from the current requirement of one year.

“Our proposed amendments to the GEM and main board listing rules received broad market support and the revised rules reflect what we believe are acceptable standards in the market and help address concerns on the quality and performance of GEM applicants and listed issuers,” said David Graham, HKEX’s chief regulatory officer and head of listing.

“GEM will become a stand-alone market and the revised main board requirements will preserve its position as a market for larger companies that can meet our highest standards.”