Hong Kong has long been one of the world’s most valuable markets for initial public offerings. That makes it all the more important to ensure quality listings. It is the only way to maintain longevity and competitiveness, as well as protect the investing public. As a gatekeeper, the city’s stock exchange operator will lift IPO requirements for the first time in almost three decades. It’s about time. Under the plan, companies seeking an IPO must have earned at least HK$80 million in combined profits in the three years before listing – a 60 per cent increase from the current threshold – while the profit requirement for the most recent year before listing will be raised from HK$20 million to HK$35 million. Unsurprisingly, during consultation, local stockbrokers, accountants, investment bankers and lawmakers who represent their sectors overwhelmingly objected to the plan to more than double the qualifying earning threshold to HK$125 million, or even HK$150 million. That would have made the city’s listing qualifications more stringent than those in London and New York, its perennial competitors for IPOs. More than 60 per cent of the 745 companies that listed on Hong Kong’s main board between 2016 and 2019 would not have made the cut. Hong Kong Exchanges and Clearing (HKEX) has made a show of compromise with the lowered threshold and acknowledged many companies have been hit hard by the coronavirus pandemic. That was a shrewd move. Any significant raising of the bar would have met strong opposition from the local financial industry. No company benefits more than HKEX from having a long queue of IPO aspirants. But as the gatekeeper, it also has public responsibilities and has to balance quantity with quality. It proposed raising the bar so high that when it came down, it looked like a real compromise with the local industry. In any case, companies that can’t meet the tougher listing qualifications of the main board can always seek a listing on the GEM market for growth enterprises and small and medium-sized businesses. While without the same prestige associated with the main board, this second board is due for a reboot, according to HKEX. Those companies that have succeeded in raising earnings can always migrate from GEM to the main board at a later stage. The new listing thresholds were proposed, negotiated and enacted before Nicolas Aguzin took up his appointment as the exchange’s new chief executive, the first non-ethnic Chinese CEO since the HKEX’s establishment in 2000. If they work as planned, the new rules will result in bigger, stronger members on the exchange. Whether they lead to a rise or fall in listings remains to be seen. It’ll be interesting to see how the former JPMorgan Chase banker will show his mettle in the new listing landscape.