No Shocks From Hong Kong's Penny Share Report

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

10 September 2002

When Hong Kong's Financial Secretary Anthony Leung set up a 2-man panel to investigate last month's 'penny share' fiasco, local commentators were quick to deride it as a whitewashing exercise which wouldn't blame anyone, and sure enough, now that the panel is due to report, a spokesman said:

"It is not expected the panel report will focus on chasing who should take the responsibility for the incident." Instead, it is understood that the report will offer only suggestions on how the proposal to de-list stocks can be revised to make it more acceptable.

Now we know why key officials involved in the sorry mess were quick to say: 'If I am blamed, I will resign'. No problem if no-one is going to be blamed.

When HKEx issued its consultation paper last month, investors rushed to dump low-priced stocks threatened by the proposals, and the Exchange was forced to withdraw its proposals for further consultation.

The original proposals recommended delisting for shares that fell below a certain level for a given number of days, effectively condemning most penny shares to death, but was short on mechanisms for life after such death. One of the most likely mechanisms to ease the pain is an over-the-counter market which could offer liquidity in delisted shares, and it's thought that the panel may recommend this approach.

The report is due to be handed to the Financial Secretary today, and he has said that he would like to publish it (as long as it doesn't blame anyone, of course!).

Among those interviewed by the panel have been the Financial Secretary, Secretary for Financial Services and the Treasury Frederick Ma Si-hang, HKEx chief executive Kwong Ki-chi, and SFC chairman Andrew Sheng.

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