Hong Kong exchange operator expects deluge of new listings, to digitise paperwork

Bourse operator Hong Kong Exchanges and Clearing (HKEX) will digitise its listings application process to cope with a deluge of newcomers, Bonnie Chan, its head of listing, said.

To be introduced before the end of the year, the digitisation will allow companies to submit their applications electronically instead of the current practice of submitting paper forms, she added.

“Technology will help us further enhance our processes and cut out paper,” she said in an interview. “The objectives of this digital transformation are to improve data quality and increase automation in the listing form submission process. It is expected to eliminate 11,000 paper forms in the first year of launch. Digitisation will also reduce human error and improve the efficiency of the overall market,” she said.

Hong Kong has emerged as a hub for listings by big technology companies after HKEX introduced reforms in April 2018. Such enhancements come as a result of an increase in flotation applications that has followed. Last year, the exchange started using artificial intelligence (AI) to help staff check the annual reports of the more than 2,500 companies listed in the city. AI might also be used in the listing applications stage at a later date.

“Ten years ago, during the busiest of times, we were handling around 60 IPO applications, simultaneously. Now, at any given point, we are handling as many as 200 IPO applications at the same time,” Chan said. Without technology, she might need to hire more people to handle the rising number of applications. Her division is currently staffed by 268 people.

Ant Group, China’s biggest digital payments provider, is to list in Hong Kong and Shanghai, in what is widely expected to be the biggest initial public offering (IPO) globally. And while the Alipay operator received an approval on September 18 from the listing committee of Star Market, the Shanghai exchange’s Nasdaq-style stock market board, it is awaiting approvals from the China Securities Regulatory Commission, the mainland’s top regulator, as well as HKEX.

Shanghai has reported on its approval process more frequently, but Chan said the Hong Kong exchange was equally transparent. “Hong Kong and Shanghai have different ways of updating the market on the progress of listing applications,” she said. “Information on our listing applications and other documents is readily available for the public to access, on our website. It is mainly in the presentation format that [we are] different,” she added.

And while the Ant listing might help Hong Kong become the world’s top IPO market this year, a title it has won seven times over the past 11 years, Chan’s team must also speed up because of expectations of even more listing applications to come, especially those by Chinese companies listed in the United States looking to flee worsening relations between the two countries. A group of top US regulators recommended in August that Chinese companies and other foreign issuers that fail to provide access to their audit working papers for oversight be delisted from American bourses by January 2022.

Chan declined to disclose the exact number, but admitted that many US listed Chinese companies had contacted the exchange to explore a listing in Hong Kong. Between Hong Kong and Shanghai, she said, the companies will make their own choices. “Listings in Hong Kong and Shanghai can serve different purposes. While many international investors are trading in Hong Kong, many domestic mainland investors are trading in Shanghai. The two markets can complement each other,” she added.

HKEX is keen on creating another wave of mega stock offerings by mainland China’s new economy companies by further tweaking its listing rules, its outgoing chief executive, Charles Li Xiaojia, said in a webinar conducted by the South China Morning Post in August. The April 2018 reform, which he oversaw, allowed companies with dual-class shareholding structures to list in Hong Kong, paving the way for mobile phone maker Xiaomi, online food delivery firm Meituan Dianping and US-listed Alibaba Group Holding, which owns the Post, to list in Hong Kong.