Hong Kong Exchange May Weaken Entry Requirements

by Mary Swire, Tax-News.com, Hong Kong

26 August 2003

Possibly reacting to a recent dearth of major new listings, the governing body of the Hong Kong Stock Exchange, Hong Kong Exchanges and Clearing (HKEx), is said to be considering waiving the three-year profit requirement for new entrants.

Currently, new entrants must be able to show a profit of HK$50 million over the previous three years, with HK$20 million of that in the most recent period. Many Chinese firms eyeing the Hang Seng don't measure up to this requirement; and it is thought also that the deficit-plagued Hong Kong administration would like to be able to float some of its assets.

HKEx's listing committee, meeting last week, is said to have discussed a change to the current rules. Committee member Ernest Ip Koon-wing, a partner at PricewaterhouseCoopers, confirmed to the South China Morning Post that the exchange was considering lowering the profit threshold. "The United States, Singapore and other advanced markets also have similar rules that allow large-sized companies to list even though they cannot meet profit requirements," Mr Ip said. "To enhance the competition of the Hong Kong stock market, we have to make it easier for large companies to list here."

Other commentators were concerned about a possible lowering of the quality of listed firms, pointing out that the second-level market, the GEM, already existed to cater for firms which didn't measure up to the top board's standards.

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