Hong Kong exchange proposes looser IPO rules for tech firms as profit falls

HONG Kong’s bourse operator said that there were signs of new momentum in the initial public offering (IPO) market as it posted a 30 per cent drop in third-quarter profit on Wednesday (Oct 19), beating analyst expectations for a steeper fall.

Hong Kong Exchanges and Clearing (HKEX) also said that it had launched a two-month consultation to make it easier for tech specialist companies to float in the market, hoping to revive falling listing revenue.

The result comes amid “continued global market fragility, a rising interest rate environment, inflationary pressures and ongoing geopolitical tensions”, HKEX CEO Nicolas Aguzin said in an earnings statement.

“However, there are early signs of renewed momentum in the IPO market, a buoyant derivatives market and continued strength in both Stock Connect and Bond Connect. We are positioned well for when market sentiment recovers,” Aguzin said.

Profit attributable to shareholders slumped to HK$2.26 billion (S$409.6 million) from HK$3.25 billion in the same period last year, beating analysts’ estimate of HK$2.22 billion.

Revenue at the company, which operates the Stock Exchange of Hong Kong, the Hong Kong Futures Exchange and the London Metal Exchange, dropped 23 per cent to HK$3.94 billion, due to weaker cash market turnover linked to tighter liquidity and sluggish trading.

Average daily turnover in Hong Kong’s securities market declined by 31 per cent in the first nine months to HK$124 billion, as market sentiments waned.

The bourse’s proposed new listing rules would apply to companies in industries including next-generation information technology, advanced hardware, advanced materials, new energy and environmental protection, and new food and agriculture technologies, HKEX said in a statement.

Under the draft rules the revenue requirement for commercialised tech firms would be HK$250 million, half of the exchange’s current requirement.

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“We expect the new proposed specialist technology rules will help to drive growth in talent and investment across these five frontier industries, such as in greentech, in the region and beyond,” Aguzin said in a separate statement.

The relaxed regime comes weeks after Washington imposed a sweeping set of export controls aimed at cutting China off from certain semiconductors made anywhere in the world with US equipment.

Chinese tech shares tumbled on the curbs, which further cloud the fundraising outlook for Chinese chipmakers.

Listing activity in Hong Kong has crumbled as Covid-19 restrictions curbed bankers’ travel to the mainland, while uncertainty over a new offshore listing rule and US-China audit spats weighed on investor sentiment.

Only US$8.8 billion has been raised in the first nine months of this year via IPOs and secondary listings in Asia’s most popular fundraising venue, compared with US$37.1 billion by the same time last year, according to Refinitiv data.

In the global listing league tables, HKEX’s ranking has dropped to fifth this year from third last year. REUTERS