The Stock Exchange of Hong Kong Limited (the Exchange), a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Tuesday) published its Listing Committee Report for 2018, a review of the Listing Committee’s work during the year and an overview of its policy agenda for 2019 and beyond.

The Exchange and the Listing Committee had a very busy and fruitful 2018.  In April, the Exchange expanded Hong Kong’s listing regime by adding three new chapters to the Main Board Listing Rules to facilitate the listings of biotech companies and companies with weighted voting rights (WVR) and also the secondary listings of WVR companies from Qualifying Exchanges¹.  Recognising the potential risks associated with these companies, the Exchange put in place necessary safeguards and, in doing so, became the first jurisdiction globally to establish a regulatory framework specifically for WVR.  As of 31 December 2018, a total of seven companies were listed under the new regime (two companies with WVR and five biotech companies), accounting for 33 per cent of the total funds raised in 2018.

In response to market concerns over “shell” activities, the Exchange applied a three-pronged approach to curb them: (i) tightening the guidance on the suitability of new applicants; (ii) concluding the market consultation on delisting which, amongst other matters, aims to prevent the manufacturing or maintenance of listed company shells; and (iii) consulting the market on backdoor listing issues to curtail the injection of unsuitable businesses into listed shells through backdoor listings without restricting legitimate business expansion or diversification.   

Meanwhile, the Exchange has continued its market education efforts on listing matters by streamlining guidance materials provided on the HKEX website and launching “Director e-Training – INEDs’ Role in Corporate Governance” on the HKEX website.

“Hong Kong took a big step forward as a financial centre in 2018 by facilitating the listing of biotech and WVR companies.  We also consulted the market on other regulatory issues including those relating to backdoor listing and disclaimer opinion, and will continue to focus on the quality and reputation of the Exchange’s markets, in particular, governance issues,” said Andrew Weir, Chairman of the Listing Committee.

For 2019, the Exchange is set to engage the market on a variety of issues, including conclusions to market consultations on backdoor listing and disclaimer opinions and reviewing issues relating to the initial public offering (IPO) process that have been raised by market practitioners (such as pre-IPO investment and settlement cycle) to ensure that Hong Kong remains competitive.

"Priorities for 2019 will include reviewing listing regime for overseas companies and promoting and enhancing the governance of Environmental, Social and Governance (ESG) risks by listed issuers.  We wish to ensure our overseas listing regime remains effective at both protecting investors and attracting issuers.  Investors globally are also demanding higher ESG transparency particularly around how companies manage their ESG risks,” said David Graham, Head of Listing at HKEX.

The Listing Committee, which consists of 27 independent members and HKEX Chief Executive as an ex-officio member², 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 2018 can be found on the HKEX website.  The website also has information on the role and mode of operation of the Listing Committee.

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