Hong Kong stock exchange plans to raise the listing threshold: the profit in the first two years is no less than HK $75 million

category:Finance
 Hong Kong stock exchange plans to raise the listing threshold: the profit in the first two years is no less than HK $75 million


The Hong Kong Stock Exchange intends to raise the listing threshold.

It is reported that the minimum profit requirement of rule 8.05 (1) (a) of the main board rules of the Hong Kong Stock Exchange has not been adjusted since its introduction in 1994. At the same time, since the minimum market value stipulated in rule 8.09 (2) of the main board rules in 2018 increased from HK $200 million to HK $500 million, the Hong Kong Stock Exchange (HKEx) has noticed an increase in the listing applications of some issuers who only meet the minimum requirements for profitability but have relatively high market value.

Under option 1, the Hong Kong Stock Exchange proposes to increase the percentage of increase from HK $200 million to HK $500 million in 2018, i.e. by 150%. At the same time, the minimum requirement for shareholders profit will be increased. In the latest financial year of the performance record period, it will be increased from HK $20 million to HK $50 million, and from HK $30 million to HK $75 million in the previous two financial years.

Chen Yiting, the listing director of the Hong Kong stock exchange, said: the proposal to raise the profitability of the main board will strengthen the difference between the main board listing and GEM Listing (GEM), and provide clearer choices and guidance for listed issuers and investors. With this proposal, we are committed to continuously improving the overall quality of the Hong Kong market and further consolidating Hong Kong as Asias leading international financial centre.

In the consultation document, the HKEx also mentioned that from a regulatory point of view, the HKEx is concerned about whether these low market value issuers are actually listed for the development of their business (as stated in the profit forecast), or whether their valuations are calculated back to meet the market value requirements so as to create potential shell companies for sale after listing in order to obtain the value attached to their listing status. If the valuations of these issuers at the time of listing are not supported by the real market, their share prices may fall sharply shortly after listing, thus damaging the interests of investors and affecting investors confidence in the appreciation of relevant shares. The lack of market demand leads to less trading volume and lower liquidity of stocks, which further makes the relevant stocks more vulnerable to speculation and speculation after listing, and causes large fluctuations in the market. Therefore, the valuation of an issuer when it is listed is not supported by the real market, which is not in line with the interests of the investing public, but also affects the overall level of listed companies on the main board. In addition, excessive valuation has also aroused regulatory concerns about whether the IPO price truly reflects the expected market price. In some cases, the price discovery process may be affected by offering rebates to investors to purchase shares, and suspected misconduct such as fabricating an artificial shareholder base. All of these actions violate the basic principle of the SEHKs listing rules that the issuance and marketing of securities should be conducted in a fair and orderly manner, and arouse the concern that the investors concerned are not independent, but to promote the creation of potential shell companies for sale, market manipulation or insider trading. Source: surging news editor: Wang Xiaowu_ NF

In the consultation document, the HKEx also mentioned that from a regulatory point of view, the HKEx is concerned about whether these low market value issuers are actually listed for the development of their business (as stated in the profit forecast), or whether their valuations are calculated back to meet the market value requirements so as to create potential shell companies for sale after listing in order to obtain the value attached to their listing status. If the valuations of these issuers at the time of listing are not supported by the real market, their share prices may fall sharply shortly after listing, thus damaging the interests of investors and affecting investors confidence in the appreciation of relevant shares. The lack of market demand leads to less trading volume and lower liquidity of stocks, which further makes the relevant stocks more vulnerable to speculation and speculation after listing, and causes large fluctuations in the market. Therefore, the valuation of an issuer when it is listed is not supported by the real market, which is not in line with the interests of the investing public, but also affects the overall level of listed companies on the main board.

In addition, excessive valuation has also aroused regulatory concerns about whether the IPO price truly reflects the expected market price. In some cases, the price discovery process may be affected by offering rebates to investors to purchase shares, and suspected misconduct such as fabricating an artificial shareholder base. All of these actions violate the basic principle of the SEHKs listing rules that the issuance and marketing of securities should be conducted in a fair and orderly manner, and arouse the concern that the investors concerned are not independent, but to promote the creation of potential shell companies for sale, market manipulation or insider trading.