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Exchange Publishes Conclusions on Reforms to Enhance Listing Regime for Overseas Issuers

Regulatory
19 Nov 2021

  • Overseas issuers listing regime proposals receive strong support
  • Proposals will be implemented with minor modifications
  • Related Listing Rule amendments and new guidance materials to take effect on 1 January 2022

 

The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) published the conclusions to its consultation on the Exchange’s proposals to enhance and streamline the listing regime for overseas issuers1.

The Exchange received 48 non-duplicate responses from a broad range of respondents. The proposals received support from a majority of respondents. The Exchange will adopt all the proposals outlined in the consultation paper with minor modifications to reflect comments received.

“These reforms will enhance the Exchange’s reputation as the global listing venue of choice and will further broaden investment opportunities for investors in Hong Kong. At the same time, implementation of the proposals will ensure that Hong Kong maintains its high standards of shareholder protection,” said HKEX Head of Listing, Bonnie Y Chan. “This new framework will support a whole new generation of international and regional issuers seeking a listing in Hong Kong. It will help facilitate orderly and efficient listing for the strong pipeline of applicants seeking secondary listings, those looking to return to Asia as a home market, and those exploring an IPO for the first time.”

The revised listing regime for overseas issuers will result in:

  • One common set of core shareholder protection standards will apply to all issuers, providing the same level of protection to all investors,
  • Greater China Issuers2 without a weighted voting rights (WVR) structure can secondary list: (a) without demonstrating they are an “innovative company” and (b) with a lower minimum market capitalisation at listing than currently required3; and
  • Grandfathered Greater China Issuers4 and Non-Greater China Issuers5 eligible for secondary listing with their existing WVR and/or variable interest entity structures6 7 may opt for a dual primary listing.

The Exchange will also publish a Guidance Letter on Change of Listing Status, to provide guidance for secondary listed issuers, on the Exchange’s approach with regards to:

  • The migration of the majority of trading in an issuer’s securities from an overseas exchange to Hong Kong;
  • Voluntary conversion to a dual-primary listing on the Exchange; and
  • De-listing from overseas exchanges of primary listing.

The amended Listing Rules and the new guidance materials will take effect from 1 January 2022 with transitional arrangements set out in the Consultation Conclusions. The webpage on “Listing of Overseas Companies” on the HKEX website will also be revamped to provide updated guidance on the revised regime.

The Consultation Conclusions and copies of the respondents’ submissions are available to view on the HKEX website.

 

Notes:

1.
Issuers incorporated or otherwise established outside Hong Kong and the People’s Republic of China.
2.
Overseas issuers with a centre of gravity in Greater China primary listed on a Qualifying Exchange8.
3.    Currently, Greater China Issuers without a WVR structure applying for secondary listing on the Exchange must have a minimum market capitalisation at the time of listing of at least either:
    (a)  $40 billion; or
    (b)  $10 billion and revenue of at least $1 billion for their most recent audited financial year.  
    In addition, these applicants must demonstrate a track record of good regulatory compliance of at least two full financial years on a Qualifying Exchange8.
    Under the new regime, these issuers would be required, instead, to have a minimum market capitalisation at the time of listing of at least:
    (a)  $3 billion if they can demonstrate a track record of good regulatory compliance of at least five full financial years on a Qualifying Exchange; or
    (b)  $10 billion if they can demonstrate a track record of good regulatory compliance of at least two full financial years on a Qualifying Exchange. 
4.    Issuers with a centre of gravity in Greater China (a) primary listed on a Qualifying Exchange8 on or before 15 December 2017; or (b) controlled by corporate WVR beneficiaries (as defined in the Exchange’s Conclusions to its Consultation Paper on Corporate WVR Beneficiaries) as at 30 October 2020 and primary listed on a Qualifying Exchange after 15 December 2017 but on or before 30 October 2020.
5.    Issuers with a centre of gravity outside of Greater China primary listed on a Qualifying Exchange8. 
6.    Retention of these structures is subject to relevant domestic laws and regulations. The Exchange’s requirements regarding these variable interest entity structures are set out in Guidance Letter HKEX-GL77-14: “Guidance on listed issuers using contractual arrangements for their businesses” and Listing Decision HKEX-LD43-3. 
7.    These issuers must have a track record of good regulatory compliance, of at least two full financial years on a Qualifying Exchange8, and meet the higher minimum market capitalisation requirements applicable to an applicant with WVR (ie at least $40 billion at the time of listing; or a market capitalisation of at least $10 billion at the time of listing and revenue of at least $1 billion for the most recent audited financial year). They must also comply with other applicable suitability requirements as set out in the Consultation Conclusions and guidance materials published by the Exchange from time to time. 
8.    The New York Stock Exchange, Nasdaq Stock Market or the Main Market of the London Stock Exchange plc (and belonging to the UK Financial Conduct Authority's "Premium Listing" segment). 

 

 

About HKEX

Hong Kong Exchanges and Clearing Limited (HKEX) is one of the world’s major exchange groups, and operates a range of equity, commodity, fixed income and currency markets.  HKEX is the world’s leading IPO market and as Hong Kong’s only securities and derivatives exchange and sole operator of its clearing houses, it is uniquely placed to offer regional and international investors access to Asia’s most vibrant markets.

HKEX is also the global leader in metals trading, through its wholly owned subsidiaries, The London Metal Exchange (LME) and LME Clear Limited.  This commodity franchise was further enhanced with the launch of Qianhai Mercantile Exchange (QME), in China, in 2018.

HKEX launched the pioneering Shanghai-Hong Kong Stock Connect programme in 2014, further expanded with the launch of Shenzhen Connect in 2016, and the launch of Bond Connect in 2017.

www.hkexgroup.com

 

 

Ends

Updated 19 Nov 2021