Hong Kong Stock Exchange

Brokers, pro-business group step up opposition to proposed listing reform

PUBLISHED : Wednesday, 05 October, 2016, 10:25pm
UPDATED : Wednesday, 05 October, 2016, 11:01pm

Listed companies, brokers and a pro-business political party have escalated their opposition to the proposed listing reform, urging officials to abandon the ongoing consultation which they warn will lead to over regulation and deter companies from listing in Hong Kong.

Daisy Yeung, chairwoman of Hong Kong Institute of Securities Dealers, said her broker industry body strongly opposed the reform, in comments made at a party forum attended by more than 300 brokers and businessmen.

“We call for the Securities and Futures Commission to abandon the ongoing consultation of the proposed listing reform which we fear would make the SFC too powerful. This will lead to market over regulation and hence drive away new listings,” she said at a forum on Wednesday co-hosted by stock broker lawmaker Chris Cheung and the Business and Professionals Alliance of Hong Kong.

The pro-business political party vice-chairman Jeffrey Lam said the business sector was worried the proposed reform would affect fund raising activities in Hong Kong.

“Hong Kong’s stock market has worked well in the past two decades to raise funds for many H-shares from the mainland and for many Hong Kong companies. This shows the existing listing approval mechanism does not have problems. The business sector is concerned the reform may do more harm than good,” Lam said.

Kenny Tang Sing-hing, chairman of The Hong Kong Institute of Financial Analysts and Professional Commentators said the reform, if approved, will empower the regulator to decide which companies should list in Hong Kong, which could limit the choice of listed companies for investors.

Other professionals had mixed views. The Hong Kong Institute of Certified Public Accountants said on Tuesday that it supported the proposed reform on the basis that it would enhance efficiency in listing policies and listing approvals.

Meanwhile, the Hong Kong General Chamber of Commerce and the Financial Services Development Council expressed their reservations, saying it would lead to overlapping regulations.

Jointly launched by the Securities and Futures Commission and HKEX in mid-June, the consultation will end on November 18. The reform proposes to create two new committees, a listing policy committee and a listing regulatory committee, on top of the existing listing committee. The committees would have equal representation by the SFC and the HKEX, and have authority to approve complicated listings and to set listing policies.

The consultation has been extended from its original deadline on September 19 to accommodate the range of views.

Under the current structure, HKEX approves IPOs and set policies. The SFC enters into the approval process at a later stage.

The recommendation has sparked heated debate in Hong Kong, with opponents arguing that the new structure gives the SFC more say in the listing process, adding to its veto power. HKEX director Vincent Lee and Chamber of Hong Kong Listed Companies vice-chairman Lo Ka-shui previously slammed the reforms, saying they would result in over regulation and “may kill off the listing market”.

At the forum on Wednesday Lo reiterated his opposition and said the consultation should be scrapped.

“There are too many problems in this consultation so it’s better to abandon it and negotiate from scratch on how to improve market quality. The current proposals are in the wrong direction,” Lo said.

Hundreds of brokers signed a petition in August opposing the proposal, saying the change could hand more control at an earlier stage to the SFC.

However, Secretary for Financial Services and The Treasury Chan Ka-keung, SFC founding chairman Robert Owen, as well as many corporate governance advocates, support the reform saying that it would increase communication and regulatory efficiency.

The SFC sent staff to attend the forum, but they did not present their views.