Hong Kong’s financial development council dismisses concerns over third board

The government-appointed Financial Services Development Council (FSDC) supports the local stock exchange’s proposal to launch a third board for start-ups although some market players are worried about related investor protection issues.

FSDC chairwoman Laura Cha Shih May-lung said the council would support the Hong Kong Exchanges and Clearing (HKEx) proposal to launch a third board to help new companies raise funds.

HKEx chief executive Charles Li Xiaojia last week said the city’s stock exchange operator is weighing launching a third board – adding to the existing main board and the Growth Enterprise Market (GEM) – tailor-made for companies that do not have the requisite profit or operational requirements to qualify for GEM.

“The FSDC last year issued a paper on the listing regime in Hong Kong that suggested Hong Kong could consider following overseas markets and create multiple markets with different requirements tailor-made for the different needs of investors and listed companies,” Cha said.

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But Louis Tse Ming-kwong, director of VC Brokerage, worries the third board could have too low an entry threshold, drawing poorly performing companies.

“It is important for Hong Kong to uphold investor protection and corporate governance standards. If we introduce a third board that has an entry level that is too low, it may prompt subpar companies to list in Hong Kong, which may undermine the quality of the Hong Kong market,” Tse said.