‘Father of Red Chips’ Francis Leung urges exchange officials to bolster trading turnover in smaller companies

Among the 2,315 listed companies in Hong Kong, 80 per cent of turnover is concentrated in 1,146 H-shares and other Chinese enterprises

HKEX should focus more on educating retail investors about opportunities in smaller listed companies

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Francis Leung Pak-to, chairman of The Chamber of Hong Kong Listed Companies, believes the HKEX has been overly focused on institutional investors, rather than local retail investors. A shift in educational priorities could help spark more trading turnover among small caps, he said. Photo: Sam Tsang

Published: 8:30pm, 30 Jan 2019Updated: 8:56am, 31 Jan 2019

The “Father of Red Chips” Francis Leung Pak-to has urged the local stock exchange to seek ways to improve the liquidity of the market, particularly that of the small to medium sized companies, or face the risk of reputational damage to Hong Kong’s role as a fundraising hub.

Leung, chairman of The Chamber of Hong Kong Listed Companies, said attracting more retail investors to trade in the local markets is a must when Hong Kong Exchanges and Clearing is developing its three-year strategy plan.

“While Hong Kong has reclaimed the crown as the No 1 IPO market worldwide in 2018, the sixth time in 10 years, we have successfully attracted many new listings. However, the trading turnover after the listings of these companies is poor, particularly for small and medium-sized companies,” Leung said in a media briefing on Wednesday.

In the past year, many new listing have slipped below their IPO prices while there were several hundreds small caps that have little or no daily turnover, Leung said.

Among the 2,315 listed companies in Hong Kong as of the end of December, 80 per cent of turnover is concentrated in 1,146 H-shares and other Chinese enterprises, according to HKEX data. The remaining 20 per cent of turnover is distributed among the other 1,169 listed companies.

“The thin turnover of the smaller companies is the result of the stock exchange policies in recent years which have placed more emphasis on attracting institutional investors,” Leung said.