Establish Hong Kong’s place in the new economy

A high-powered financial forum initiated by new Chief Executive Carrie Lam Cheng Yuet-ngor and chaired by Financial Secretary Paul Chan Mo-po has discussed reforms to attract more new-economy companies to list on our stock market. It is a clear signal of the key part the direction of economic development is expected to play in Lam’s first policy address next month.

The new economy has already galvanised the traditional business rivalry between Hong Kong and Singapore, which are both now playing catch-up to avoid being left behind. The island state may become the first Asian bourse to allow dual-class-share initial public offers – a reform also at the top of the agenda of the Hong Kong forum – in a bid to become a tech hub and a regional magnet for IPOs.

Hong Kong has also so far not allowed such listings, which enable founding shareholders to retain control with minority holdings by giving some shares more weight, because of worries about sidelining ordinary shareholders. But they have been on the city’s mind ever since e-commerce giant Alibaba – owner of the Post – took its dual-class-share listing to New York after it was rejected by Hong Kong.

A recent public consultation on the controversial idea is reported to have revealed consensus among finance industry professionals on broadening the market and allowing dual-class shares on a third trading board that would also host start-ups with no profit record, but division on how to go about it.

Hong Kong Exchanges and Clearing and the Securities and Futures Commission both presented briefings and will do follow-up work before the forum reconvenes in the last quarter of the year.

Hong Kong may have Asia’s third-largest equity bourse by market capitalisation, but we face regional competitors who are prepared to undertake aggressive structural reforms in a bid to capture the opportunities offered by China’s rise. If Hong Kong does not push forward and clings to old ways of doing business, it stands to miss out. In that respect it is good that in Lam’s consultations ahead of her policy address, a recurring theme of her remarks has been the need to strike a balance between regulation to protect investors and development, in order to meet the needs of the new economy.

With the development of the new economy, share structures can be quite different from traditional companies. As a result regulations are prone to become outdated. It is good to see the government set up this forum headed by the financial secretary to look into the issue. We trust economic policy will be a centrepiece of the policy address, and that the government will set some landmark direction on where Hong Kong is headed over the next five years.