By Yusra Barmaz
New listing rules brought in by the Hong Kong bourse should result in an increase in the number of companies listing their shares in the territory.
Within just a few days of the rule changes Chinese smartphone manufacturer Xiaomi announced it is to float on the Hong Kong exchange, a listing which could raise $10 billion.
The reforms are designed to encourage more technology and biotechnology companies to list on the Hong Kong market. They are the most significant changes brought in since Chinese companies were allowed to list ‘H’ shares in the early 1990s.
Importantly, the changes means that companies can now list with dual-class shares for the first time: this is a structure that many new starts-ups prefer. Founders will now be able to own shares with 10 times the voting rights of ordinary shares, thus keeping control of their companies. Jacqueline Shek, ZEDRA Executive Director – Trust Services, Hong Kong ZEDRA said: “Five years ago, the Hong Kong market missed out on the listing of Alibaba because it refused to allow the company’s founders to retain control. With the new dual-class listings, more technological and biotech ventures are likely to choose to list on the Hong Kong bourse”.
In addition, the changes mean that biotechnology companies will be able to list even if they are not yet making any income. This change should help attract research and development biotech companies from mainland China to choose the Hong Kong market for their listing.
The final rule change allows overseas-listed companies to have secondary listings in Hong Kong to encourage innovative Chinese companies which have listed on foreign exchanges to seek a secondary listing closer to home.
ZEDRA Hong Kong Managing Director, John Ashwood said: “The Hong Kong stock exchange should be congratulated in bringing in these reforms which will undoubtedly help boost the market”.