A survey conducted by Hong Kong Exchanges and Clearing Limited (HKEx) in December 2001/ January 2002 revealed that despite unfavourable economic conditions, listed companies, investment banks and fund managers showed confidence in the Hong Kong primary stock market. The Hong Kong primary stock market remains attractive for the listing of Mainland companies.

Fifty-seven per cent of respondents to the Primary Market Survey showed high confidence in the Hong Kong primary stock market. Despite the less favourable economic conditions, the general market conditions were considered favourable, including the initial and subsequent fund-raising capability, competitiveness of pricing of IPOs, and attractiveness of market liquidity and the investor base.

For the primary listing of Mainland companies - H shares and red chips, the Hong Kong stock market's attractiveness is considered high vis-a-vis overseas markets (59 per cent positive vs 9 per cent negative). Hong Kong is also considered attractive vis-a-vis Mainland China (43 per cent positive vs 32 per cent negative).

In respect of the initial listing requirements, 64 per cent of all respondents considered those for the Main Board appropriate while 35 per cent considered those for Growth Enterprise Market (GEM) appropriate. In respect of compliance requirements, 51 per cent considered those for Main Board appropriate while 36 per cent considered those for GEM appropriate. Forty per cent of all respondents considered the regulation of Main Board companies effective and 25 per cent considered that of GEM companies effective. Twenty-nine per cent of all respondents considered the regulation of insider trading effective.

Listed companies considered the content and timeliness of information disclosure of listed companies to be fairly good (about half of listed companies were positive for Main Board companies and over one-third were positive for GEM companies) although fund managers were less positive.

Thirty-two per cent of investment banks and 28 per cent of fund managers considered the corporate governance of Main Board companies good, while 27 per cent and 12 per cent respectively considered that of GEM companies good.

As for the Exchange's performance, respondents were fairly satisfied with the Exchange's professionalism and quality of service (over 40 per cent positive vs about 20 per cent negative). They also considered that the priority the Exchange gave to public interest was fairly high (48 per cent positive vs 16 per cent negative). The efficiency of the Exchange in processing initial listing applications and subsequent share issues were considered moderately satisfactory (over one-third positive vs less than 30 per cent negative).

It should be noted that the survey fieldwork took place in December 2001/January 2002 prior to the recent global focus on corporate governance. Moreover, the survey is subject to a number of limitations which have to be noted when interpreting the findings. For example, some respondents might not be familiar with or have conflict of interests in some market aspects, which affect the objectivity of their evaluation.

"It is encouraging to find that the Hong Kong primary stock market environment remained attractive and retained user confidence despite the less favourable conditions recently," commented Matthew Harrison, Senior Vice President of HKEx Corporate Strategy - Research & Policy. "Increased user satisfaction is also observed in areas such as corporate governance of Main Board listed companies and the effective regulation of these companies and their sponsors, compared to the findings obtained in the last survey in 1998. The survey findings provide useful insights for HKEx to further improve the primary market environment within its jurisdiction and its services to the users."

Richard Williams, Senior Vice President of HKEx Listing, said, "The Listing Division is acutely aware of concerns raised in respect of the Division's handling of regulatory announcements and applications. In July 2002 we announced proposals for streamlining the listing process and improving efficiency and the quality of vetting. Some steps have already been made and we are committed to implement the balance in early 2003. The new approach will reinforce the current requirements and general expectation that listing applicants, their directors and professional advisers are responsible for ensuring the quality of disclosure."

For the periodic monitoring of the condition of, and the user satisfaction with, the Hong Kong primary stock market, HKEx (formerly the Stock Exchange of Hong Kong) has conducted the Primary Market Survey roughly triennially since 1991. The last survey was conducted in 1998. 538 responses were received to the 2001/02 survey: 412 listed companies, 38 investment banks and 68 fund managers in Hong Kong. The "primary stock market" refers to all aspects of the listing of stocks on the Stock Exchange's Main Board and GEM, including fund raising, and of the subsequent maintenance of that listing and continuous compliance.

A full report of the Primary Market Survey 2001/02 is available on the HKEx website (http://www.hkex.com.hk/eng/stat/research/research.htm).