HKEX, Beijing’s new third board in dual-class listings accord

Hong Kong exchange to reveal conclusions on Tuesday of public consultation on what could lead to biggest listing reforms in 30 years

PUBLISHED : Sunday, 22 April, 2018, 9:00pm
UPDATED : Sunday, 22 April, 2018, 11:37pm

Hong Kong Exchanges and Clearing (HKEX), the operator of the city’s stock exchange, has signed an agreement with Beijing’s over-the-counter exchange, the National Equities Exchange and Quotations (NEEQ), marking the latest effort in its bid to land more mainland technology start-up listings.

NEEQ, also known as the “new third board”, was created in 2012 to help fund innovative start-ups.

At the end of last year, 11,600 firms had signed up to trade on it, raising 400 billion yuan (US$63.53 billion) since inception.

The memorandum of understanding (MOU), signed on Saturday between the two, comes just days ahead of HKEX announcing the conclusions of a public consultation (on Tuesday) on what’s likely to be its biggest listing reforms in three decades, including the green light for dual-class listings in Hong Kong for technology and biotech firms, even those without revenues.

HKEX chief executive Charles Li Xiaojia said on Friday that firms will be allowed to apply for listings from April 30, while issuing an invitation to tech companies already listed on NEEQ to apply to float shares in Hong Kong too.

Hong Kong exchange to accept listing applications under new rules from April 30, chief says

The MOU outlines the creation of a long-term cooperation mechanism by HKEX and NEEQ which will allow a strengthening in their information sharing, regulatory collaboration, and joint efforts in investor education.

The agreement was rubber stamped by HKEX’s head of mainland development Mao Zhirong and NEEQ’s general manager Li Ming, in Beijing.

“The signing shows both the mainland and Hong Kong are determined to establish a more open and multi-layered capital market,” Charles Li said.

“Hong Kong is an open market with clear and transparent listing rules and procedures. We welcome all NEEQ companies that meet our requirements to list in Hong Kong.

“We look forward to strengthening our information sharing and collaboration on regulatory matters. We also aim to cooperate on investor education initiatives.”

Gordon Tsui Luen-on, managing director of Hong Kong-based brokerage Hantec Pacific, welcomed the agreement.

“Some technology companies now listed on the new third board in Beijing have already approached Hong Kong brokers to arrange listings in Hong Kong.

“The MOU and the listing reforms [to be announced on Tuesday] will help attract more of these technology companies to list in Hong Kong this year,” Tsui said.

While new third board start-ups can also opt to list in Shanghai or Shenzhen, Tsui added he was confident HKEX offers a more attractive proposition.

“According to mainland regulations, these new third board companies would need to delist from there before they could list in Shanghai or Shenzhen,” he said.

Hong Kong exchange eyes new role to keep its edge over rival bourses

“HKEX, however, would allow them to list while continuing to trade on the new third board. Hong Kong listing rules are more flexible than those in the mainland.”

Despite many of the likely candidates being small in size, Tsui said they will qualify to list on what is effectively Hong Kong’s own ‘second board’, the Growth Enterprise Market, which does not require companies to be in profit.

Hong Kong’s main board requires applicants to have registered over HK$50 million (US$6.37 million) in profits for the three years before listing.

“New third board technology firms can be a new source for the GEM. When they grow bigger, they could then move up to the main board. This will help Hong Kong achieve goal of becoming a hub for tech listings,” Tsui said.

Charles Li has vowed to overtake New York’s tech-led Nasdaq exchange in size within five years. It faces stiff competition for the accolade, however, with Singapore, Shanghai and Shenzhen already jostling hard to win more tech listings.