[Listing Reforms] HKEX's 3 Major Reform Directions - Market Views at a Glance (Continuously Updated)

To enhance Hong Kong’s listing mechanism competitiveness, the Hong Kong Stock Exchange is optimizing the rules for same-class different voting rights (WVR) listings, facilitating overseas listings and return flows, and expanding the confidentiality submission process for listing applications to all companies. An overview of market opinions.

Table of Contents

• Sponsor: An important and timely measure
• Accounting sector: Attractive to companies interested in listing
• Industry organizations: Moderately relaxing thresholds to help companies go public
• Think tank Jinfabureau: Reasonable, appropriate, and timely direction to diversify listed companies
• Think tank Unite Hong Kong Foundation: Balance “enhancing competitiveness” with “protecting investors”

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Sponsor: An Important and Timely Measure

Morgan Stanley Managing Director and Head of Hong Kong Listing and Corporate Finance, Bai Sijia, posted on social media that the consultation on enhancing the Hong Kong listing framework’s competitiveness is an important and timely move for the sustained development of Hong Kong’s capital market.

She stated that the listing system must be continuously improved, maintaining Hong Kong’s long-standing high regulatory standards while also balancing flexibility and competitiveness. She believes this consultation is another key step in strengthening Hong Kong’s capital market ecosystem and long-term competitiveness, reflecting the Exchange’s serious listening to market opinions and active response to global capital market trends.

Accounting Sector: Attractive to Companies Interested in Listing

PwC Capital Markets Services Partner Huang Jinqian welcomed the extension of confidential applications to all companies by the Hong Kong Stock Exchange. Many companies are concerned about whether they can list without disclosing all prospectus details and company information, so confidentiality is attractive to those interested in listing. He also revealed that among the inquiries received, a considerable number of companies prefer to submit applications confidentially.

He pointed out that since May last year, the HKEX has allowed special technology and biotech companies to submit confidential applications, and many relevant clients have used this channel to list.

Regarding the relaxation of WVR listing thresholds, if the market value at listing reaches HKD 40 billion, the voting rights for privileged shares can be increased from a maximum of 1 share/10 votes to 1 share/20 votes. He noted that many companies listed on qualified overseas exchanges are currently ineligible to return due to existing regulations. The adjustments will help attract more companies to list in Hong Kong.

Industry Organizations: Moderately Relaxing Thresholds to Help Companies Go Public

Huang Mingwei, Secretary General of the Hong Kong Listed Companies Association, supports moderate relaxation of WVR thresholds, allowing more WVR companies to qualify for listing. The rapid growth of tech companies, combined with targeted enhancements to the “innovative industries” regulations, will help Hong Kong provide more listing channels for various types of enterprises.

He said that although thresholds are being relaxed, he believes the HKEX and other regulators will maintain proper market oversight, ensuring only worthy and suitable companies go public.

Think Tank Jinfabureau: Reasonable, Appropriate, and Timely Direction to Diversify Listed Companies

Deng Yiyue, CEO of the Hong Kong Financial Development Council, stated that this listing reform aligns with the government’s long-term development report on Hong Kong’s capital market released last December and recent industry communications. He supports the proposed directions in the consultation document, considering them reasonable, appropriate, and timely, which will help attract more diverse listed companies to Hong Kong.

He mentioned that Hong Kong does not only need “giant” listed companies. To attract European or Southeast Asian firms, their market values may not be very large. Lowering the WVR market value threshold is very suitable to meet market demand. Additionally, relaxing the second listing threshold will promote the internationalization of Hong Kong’s market, making it easier for investors to invest in domestic and overseas companies via Hong Kong.

However, he believes that successful implementation depends on timing. About ten years ago, in a low-interest environment, some proposals were difficult to implement because companies lacked urgency to list. When interest rates are higher, companies find it harder to raise funds through private markets, increasing the need for public listings. Currently, with relatively high interest rates, launching these proposals is more appropriate, helping Hong Kong’s capital market meet financing needs across different economic cycles.

For the next phase of market reforms, he suggests emphasizing the importance of passive investment in the capital market, better leveraging ETFs to allocate resources. Both domestic and international passive investment, including index funds, could consider launching new indices that include WVR companies, biotech firms, or other companies planning to list in Hong Kong. Attracting more overseas passive funds to focus on Hong Kong stocks will help build a more liquid market.

Think Tank Unite Hong Kong Foundation: Balance “Enhancing Competitiveness” and “Protecting Investors”

Wai Chi-wai, Vice President of the Unite Hong Kong Foundation and Executive Director of the Public Policy Research Institute, said that the overall reform measures will help strengthen Hong Kong’s position as an international financial center. However, there must be a balance between “enhancing competitiveness” and “protecting investors.” He called for strengthening information disclosure, independent director oversight, and corporate governance monitoring. Especially for companies with 1 share/20 votes, clearer and more prominent risk warnings should be provided. If a company deviates from governance norms or engages in abuse of power, market warnings should be issued first, and in severe cases, consideration should be given to forcibly reducing the proportion of different voting rights.

To ensure smooth implementation of the reforms, he recommends that the HKEX quickly develop a clear timetable after releasing the consultation summary. He also suggests providing pre-consultation or informal communication channels before new rules take effect, helping companies prepare application documents early, thereby shortening the actual listing approval process after the new rules are implemented.