Jake's ViewHong Kong’s penny stock woes will only worsen with the exchange’s new board

Shares of more than a dozen Hong Kong-listed companies, most of them penny stocks, plunged more than 50 per cent yesterday morning ... -- Business, June 28

This is not the first time that penny stocks have been threatened because they give the Hong Kong stock market a bad name, far from it.

But get ready to see the headlines feature this story again and again if the exchange’s chief executive, Charles Li Xiaojia, gets away with his proposal to create a new hurdle-free trash board on the market.

His idea is to return to the old four-boards market we used to have before 1986, three boards of which, including the existing main board, he would be just as happy to see go away and not bother him any more as long as he can have his new trash board pro for high flying high tech stocks.

It will be for “New Economy” companies, an ill-defined catchphrase, it will list “pre-profit” companies, which ignores the question of how they can be sure that they ever will be profitable when such startups rarely are so, and it will require no track record of applicants, which is as much as saying most of them will indeed be of this dubious pre-profit nature.

In addition, there will be no lower limit on size. Applicants will need only an “expected” market capitalisation of HK$200 million.