Hong Kong is broadening its listing channels; HKEx’s big changes hide stealth mode deals you NEEQ to know about

Already a mature capital market, Hong Kong aims for more. The city’s stock exchange operator, the Hong Kong Exchanges and Clearing (HKEX), has made a series of moves recently in a bid to lure more companies to go public in Hong Kong. In addition to the big headline changes, quieter changes are afoot.


Baby, I NEEQ you

Last week, HKEX has signed an understanding of memorandum with the National Equities Exchange and Quotations (NEEQ). NEEQ is a Chinese over-the-counter system for trading shares of public limited company that not listed in the two stock exchanges in Shenzhen and Shanghai. According to the agreement, eligible companies would be allowed to list on both the HKEx and NEEQ without having to complete the approval process for each exchange – a two for 1 deal. This also means Chinese companies listed on NEEQ can go public in Hong Kong without delisting in mainland China.

The agreement outlines the creation of a long-term cooperation mechanism by HKEX and NEEQ, which involves strengthening their data sharing, regulatory collaboration, and joint efforts in investor training.

“We look forward to strengthening our information sharing and collaboration on regulatory matters. We also aim to cooperate on investor education initiatives,” a spokesperson from the HKEX said.

“Hong Kong is an open capital market with clear and transparent Listing Rules and listing procedures. We welcome all NEEQ companies and other companies that meet our listing requirements to list in Hong Kong,” he said.

A person familiar with the Chinese regulatory authority said, “once the China Securities Regulatory Commission gives the permission, NEEQ-listed companies will be allowed to issue shares in Hong Kong if they can meet listing requirements of the Hong Kong market. So the initiative is at the HKEX’s hands.”

This comes at a time when China vows to commit to economic openness. At the recent Boao Forum in Hainan, Chinese president Xi Jinping pledged to open up Chinese markets further.
Good intentions made real

A dual listing on NEEQ and HKEX makes real the two-way opening of the capital market. It will also broaden the financing channels for small and medium-sized companies in the mainland.
Also known as the “new third board”, NEEQ was created to help startups raise funds. This partnership is also in line with the recent regulatory changes by the HKEX that aim to assist pre-revenue biotech startups, among other things.

Bringing life to biotech startups

On Tuesday, HKEX closed a public consultation on dual-class listing and listing of biotech firms that have yet to generate income. Last month, HKEX held its first Biotech Summit to gather biotech entrepreneurs, investors and industry insiders together to seek advice from various parties on its proposed changes.

On Tuesday, HKEX said the proposed initiatives to broaden Hong Kong’s listing regime were well-received by the stakeholders, and the new rules will take effect by the end of this month. Companies in emerging and innovative sectors – broadly implying biotech firms – seeking to list under the new regime may submit formal applications from April 30.

“After a remarkable four-year journey of careful deliberation, HKEX’s new listing regime is finally open for business. We are now at the dawn of an exciting new era for Hong Kong’s capital markets,” said HKEX chief executive Charles Li.

3 big moves

HKEX is now adding three new chapters in the Main Board Listing Rules – permit listings of biotech issuers that do not meet any of the Main Board financial eligibility tests; permit listings of companies with weighted voting right (WVR) structures; and establish a new concessionary secondary listing route for Greater China and international companies that wish to secondary list in Hong Kong.

“We believe our new regime will meet the competitive demands of the market, whilst maintaining our high standards of investor protection. The regime provides a practical way to expand Hong Kong’s listing regime to attract more companies from emerging and innovative sectors to its market,” HKEX said.