Hong Kong plans to overtake Nasdaq as listing destination of choice for Chinese biotech firms
Chief executive Charles Li Xiaojia says listings could start as early as this summer after new rules come into effect
Hong Kong’s stock exchange has set a goal of overtaking New York’s Nasdaq market within five years in the number of listings of mainland Chinese biotechnology firms and their market capitalisation, according to its chief.
This is the exchange’s “small initial goal” as a nascent listing venue for biotech firms, Charles Li Xiaojia, the chief executive of Hong Kong Exchanges and Clearing (HKEX), told reporters on Thursday.
“This is unlikely to be achieved by year end, and it is hard to say whether it can be attained in one to two years, but we will strive to do so in three to five years,” he said on the sidelines of exchange operator’s inaugural biotech summit, which aimed to foster a funding ecosystem for biotech firms in the city.
HKEX will close a market consultation exercise on Friday on a set of proposed rules that will allow biotech firms that have yet to generate any revenue to list. All listed firms must have revenue and profit track records under current listing rules.
Separate rules for large high-growth technology companies with multiple classes of shares that carry different voting rights, as well as for overseas-listed companies seeking a secondary listing in Hong Kong, are also part of the exercise.
Li said HKEX expected to publish the new listing rules by the end of next month, so that the first batch of listings allowed under them would be a reality as soon as the start of summer, with a bigger number of listings in the autumn.
He said there was no fixed number of firms planned by HKEX in the first batch or subsequent ones, and the exchange would not proactively decide which firms and how many should be listed, even as some people have suggested that it should in order to ensure the market’s “quality”.
“We don’t have the DNA in us of proactively controlling the market … we hope to let the market decide how many and which companies should be listed or not listed as much as possible, subject to some adjustments that are transparent and fair, depending on our applications vetting capacity,” he said.
“We strive to provide very clear rules so that the market knows exactly what to do [to meet the requirements].”
He said that “nobody can guarantee that the quality of the first batch of biotech firms to be listed will be especially high” and that every biotech firm faces the risk that their products may not get drugs regulators’ approval for commercialisation due to safety or efficacy issues.
However, to help its over 200 listing division staff become better at demanding disclosure by listing candidates so that investors have sufficient information to make decisions, Li said the exchange had added several executives with expert knowledge in the biotech sector.
“We will keep hiring, but it is tough since all financial institutions are seeking such talent,” he noted.
Meanwhile, asked if the Shanghai bourse’s plan to allow non-mainland listed firms to issue shares traded in the mainland via the so-called Chinese Depository Receipts system in a proposed international board would erode Hong Kong’s market position as an intermediary between mainland firms and overseas investors, Li said such worries are not productive.
“We should avoid the mentality of thinking how other people will or will not use our market, we should instead think how we can evolve ourselves into a market that will be valuable to others … we know what the market needs and we know our competitive strengths.
“Relative to overseas markets, we are like a China market … relative to the mainland bourses, we are like an international market.”