Hong Kong Exchanges and Clearing Limited (HKEx) has issued the following statement in response to media enquiries regarding precautionary measures adopted by issuers listed by introduction to ensure that their shares are traded on an orderly, informed and fair basis.
In December last year, the Stock Exchange of Hong Kong (the Exchange), a wholly-owned subsidiary of HKEx, said it would consider applications for listing by introduction only if the new applicant and its sponsor could satisfy the Exchange that there would be adequate precautionary measures in place on and from the first day of listing on the Exchange.
In the first approved listing by introduction since then, a Singapore-listed real estate investment trust – Fortune Real Estate Investment Trust (Fortune REIT) – has adopted certain precautionary measures in order to provide reasonable supply of units and information to investors and to contribute to the liquidity of trading in the units upon its debut on the Hong Kong market.
Fortune REIT is a REIT authorised by the Securities and Futures Commission (SFC) under section 104 of the Securities and Futures Ordinance. Both the SFC and the Exchange have been consulted in developing the Fortune REIT precautionary measures. These measures were spelled out in section 19 of the issuer’s listing document.
While the precautionary measures adopted by this issuer are useful reference for future listing by introduction applications, they are not the only acceptable measures. Arrangements for each listing by introduction application will be based on its circumstances and relevance of the measures, such as the applicant’s shareholding structure and availability of arbitrage opportunities between Hong Kong and another market where the issuer is listed.
Highlights of Fortune REIT’s precautionary measures include:
| 1. |
At least 15 per cent of the issuer’s units will be transferred to Hong Kong prior to listing, and up-to-date transfer information will be provided to the public closer to the listing by way of announcement.
|
| 2. |
Three special batch transfers (free of registrar charges) will be organised to facilitate transfers of the issuer’s units to Hong Kong.
|
| 3. |
Transfer of the issuer’s Singapore units to Hong Kong can be expedited from 13 to nine business days, the shortest transfer time under the current market infrastructures of both places.
|
| 4. |
Two listing agents will act as bridging dealers on a voluntary basis and independently arbitrage meaningful price differentials between Hong Kong and Singapore for the first month of listing. This is expected to mitigate demand/supply imbalances between the two markets and contribute towards liquidity of the units in Hong Kong. To bridge the settlement and transfer gaps, the two bridging dealers have entered into bridging arrangements to borrow units (up to 10 per cent of total units in aggregate) to meet settlement and build ownership of inventory (approximately 1 per cent in aggregate) of the units. The bridging arrangements operate on commercial bases and the arrangements have been fully disclosed in the listing document. Other market participants who have access to the units can compete for arbitrage opportunities with the two bridging dealers, subject to compliance with applicable laws and regulations.
|
| 5. |
In addition to its listing document, the issuer will make a further announcement to disclose the number of units which will have been transferred to Hong Kong on its first day of trading and the designated broker numbers of the bridging dealers to be used for arbitrage transactions. A daily announcement will also be issued in Hong Kong and Singapore about Fortune REIT’s previous day closing price on the Singapore market during the last three business days prior to the Hong Kong listing. Other communications, such as briefings and information fact sheets, have also been planned by the issuer. |
The precautionary measures adopted for the Fortune REIT listing are expected to mitigate price volatility, but it is still possible that undue temporary supply and demand imbalances may occur and there is no guarantee that undue volatility can necessarily be totally prevented.
Investors are reminded to read the listing documents, prospectuses and regulatory announcements in full before making any investment decision in newly listed securities. If they have any doubts or want to make reference to the trading in other relevant markets, they should consult their brokers or professional advisors.