The Stock Exchange of Hong Kong Limited (the Exchange), a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Monday) published its Listing Committee Report 2015, a review of the work of the Listing Committee in upholding market quality last year and an overview of its policy agenda for 2016 and beyond.
"Last year was a particularly busy year for the Listing Committee and the Exchange's Listing Department. Much was achieved and I would like to thank the Committee for their expertise and dedication. In relation to initial listings, the Committee considered 112 listing applications, and published country guidelines which clarified the listing requirements of companies incorporated in three new overseas jurisdictions," said David Graham, HKEX's Chief Regulatory Officer and Head of Listing. "In addition to initial listing matters, market activity was up sharply in 2015, with issuers' corporate activities such as fundraisings, acquisitions and takeovers increasing substantially. This required considerable regulatory focus."
During the year, the Listing Department conducted an extensive review of backdoor listing-related transactions, cash companies and RTOs to identify trends and potential issues in those areas. The review found there was a substantial increase in takeovers through general offers or large-scale share subscriptions but a decrease in RTO transactions after the RTO rule was tightened in 2014. This new trend involving large scale fundraisings often resulted in a change of control of the listed issuer and the subscribed cash being invested in new business, resulting in the original business of the issuer being marginalised. These activities generally involved companies of smaller market capitalisation, and material share price volatility in the periods before the takeovers were announced.
"We always address new issues and trends in the market quickly. In the interest of maintaining the quality and reputation of the Hong Kong market, the Exchange issued a number of guidance letters including guidance on the criteria for and principles of trading halts; guidance on cash companies; and guidance where an issuer disposes of assets amounting to a "very substantial disposal" under the Listing Rules. We believe that these steps were important, timely and effective," Mr Graham said.
"The Listing Committee also considered it necessary to adopt a more robust delisting policy for long suspended companies," he added. "In 2016, we will conduct a detailed review of our regulations in connection with listed companies including RTO and cash companies and our handling of long suspended companies, delisting and related requirements, all with a view to continuing to improve the quality of our market and protecting the interests of investors."
Having noted that the current Growth Enterprise Market (GEM) regime has been in operation for around seven years, and taking into account the new sponsor regime which came into effect in late 2013, a review of GEM has also been included in the Listing Committee's policy agenda for 2016 and beyond.
The Listing Committee, which consists of 27 independent members and HKEX Chief Executive as an ex-officio member, acts both as an independent administrative decision maker and an advisory body for the Exchange. It oversees the Listing Department, provides policy advice to the Exchange on listing matters, takes decisions of material significance for listing applicants, listed issuers and the individuals concerned, and acts as a review body.
The Listing Committee Report 2015can be found on the HKEX website. The website also has information on the role and mode of operation of the Committee.
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