HONG KONG: Hong Kong Amid fierce competition to lure tech company listings, Hong Kong’s sole stock exchange is considering launching a new board for issues with weighted voting rights, a controversial stock model that regulators shot down in 2015. Hong Kong Exchanges & Clearing CEO Charles Li Xiaojia said discussion regarding the move would hopefully be part of a “holistic” consultation that would also include a review of the Growth Enterprise Market board and listing regulatory regime. Both have been under fire for providing fertile ground for shell companies to trade in Hong Kong. Li did not specify when an official proposal might be made, though he emphasized that the bourse would like to make “meaningful, tangible progress” this year on issues surrounding public offerings. Last June, the Hong Kong bourse and the Securities and Futures Commission began joint consultation on the possible introduction of two new committees to oversee listing policies and applicant vetting. Feedback regarding that consultation, Li said, is still being studied.
Hong Kong’s move follows that of rival Singapore. Loh Boon Chye, CEO of the Singapore Exchange (SGX), said in mid-January that a public consultation on dual-class shares — a structure allowing senior executives of a company to retain voting rights disproportionately larger than their stock holdings — is set to be launched by the end of March. “We have given quite a bit of time for the topic to be discussed in the marketplace, so now we follow up with the public consultation,” Loh said, implying that Singapore has moved faster than Hong Kong in reforming its listing regime. “We have broadcast our intention to offer various capital structures, dual class included.” Last year, the SGX managed to raise just $1.56 billion from five initial public offerings, representing 1.1% of the funds raised from primary issues globally. This was slightly better than in 2015, when it hosted just one main board listing, worth $183 million, according to data from Dealogic. Enticing global tech companies could help Singapore lift its IPO market and close its gap with Hong Kong, which was ranked the world’s No. 1 IPO hub for two consecutive years. Not everyone, however, is convinced that dual class is the way to go.
“While we fully understand the commercial pressures on SGX, and empathize with its predicament regarding IPOs, we do not see dual-class shares as any sort of panacea — and it will raise both investment and regulatory risk,” the Asian Corporate Governance Association wrote in a September report. MIXED VIEWS The ACGA is also skeptical about the introduction of dual-class shares in Hong Kong. Jamie Allen, the association’s secretary-general, told reporters last September that such a move could hurt the value of the market, citing a survey that found some 40 or 50 institutional investors would apply an average 13% discount to Hong Kong issues should dual-class shares become the norm there.
