Hong Kong approves dual class shares and unprofitable biotech listings in sweeping market reform

The new rules will kick into effect on April 30.

The Stock Exchange of Hong Kong Limited has announced that the proposed new rules to Hong Kong’s listing regime will kick into effect on April 30, according to a press release.

“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.

Also read: Hong Kong poised to top global IPO market in 2018

The reform includes permitting the public listing of biotech issuers that do not have a track record of profitability as well as listing of companies with weighted voting right (WVR) structures.

The biotech sector was chosen as initial focus in widening market access as they make up a majority of companies in the pre-revenue stage seeking a Main Board listing and activities like clinical trials tend to be highly regulated under the current regime that sets external milestones on development progress, an earlier noted reported.

The Exchange is also making room for a concessionary secondary listing route for Greater China and international companies seeking a secondary listing in Hong Kong.

The reforms, which are one of the biggest changes in almost two decades, are intended to buoy the local bourse status to lure blockbuster international listings as it bids to challenge New York’s dominance in global IPO rankings.

Also read: Hong Kong bourse still loses to New York in IPO funds raised in Q1

“The consultation solicited market feedback on what we consider to be the best way forward to meet the competitive demand in the market whilst maintaining our high standards of investor protection, and it was well supported by the market,” said David Graham, HKEX’s Chief Regulatory Officer and Head of Listing. 

Hong Kong lost to both New York and Shanghai in terms of global IPO proceeds last year after it raised only $128.2b due to a glaring lack of blockbuster listings.

However, the sweeping reforms are set to change Hong Kong’s dismal IPO outlook and the payoff for HKEX could come soon. Amazon-backed cancer detection firm Grail Inc, biotech company Shanghai Henlius Biotech and diabetes drug developer Hua Medicine are all reportedly mulling a listing in the city amidst wider market access. Xiaomi and Ping An Insurance are also lining up to go public in Hong Kong.