Aberdeen Standard leads calls for more investor protection within HKEX’s proposed listing reforms

The proposed listing reform put forward by Hong Kong Exchanges and Clearing has drawn mixed reactions from fund managers who say it would be a step backward for corporate governance and investor protection, even as it would likely attract premier technology companies to list in the city.

“Hong Kong has achieved a lot of corporate governance reforms over the past two decades but the listing reform to allow dual-class shares structured companies to list here is a big step backward from the corporate governance point of view,” said David Smith, head of corporate governance Asia-Pacific at Aberdeen Standard Investments.

HKEX’s month-long consultation on the rule change will conclude on March 23. The reform package would broaden the listing regime by opening the door to pre-revenue biotech companies as well as companies with weighted voting rights, a structure seen as favourable to technology companies and their founders.

The HKEX said in February they would push to accelerate the timetable for the widely-expected regime change by several months, potentially ushering in new rules by late April in a bid to become the first exchange in Asia to eliminate listing barriers for technology unicorns.

“It is sad to see Hong Kong, Singapore and the mainland stock exchange change their listing rules to allow dual class share companies to list as they all want to be champions of IPOs while the regulators no longer act as the gatekeepers to safeguard the interest of investors,” Smith said in an interview with the South China Morning Post.

“It is positive the HKEX has proposed these dual class shareholding companies would have to adopt one share, one vote on some key events but still, I am not sure if that is good enough for investor protection,” he said.