Hong Kong has no plans to stop foreign companies from listing there by way of introduction despite concerns over the large movements in the share prices of some recent listings, officials from the Hong Kong stock exchange and the government said yesterday.
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No halt to dual listings in Hong Kong
HKEx denies media reports, says it will not stop listings by way of introduction
By CONRAD TAN
20 January 2010
Hong Kong has no plans to stop foreign companies from listing there by way of introduction despite concerns over the large movements in the share prices of some recent listings, officials from the Hong Kong stock exchange and the government said yesterday.
But firms seeking to list there by way of introduction - where a company already listed elsewhere pursues a dual listing in Hong Kong without offering new shares - must satisfy regulators that it will make available enough of its existing shares to satisfy the demand from investors in Hong Kong.
That is to prevent its share price from being manipulated, said Lawrence Fok, head of issuer marketing at Hong Kong Exchanges and Clearing, or HKEx, which manages the Hong Kong stock exchange.
Reports suggesting that it could stop such listings are ‘absolutely not true’, he said, in response to questions from BT. ‘What we want is to be sure that when a company wants to list by way of introduction, there are enough shares on day one, because if there are not enough shares, investors can ramp up the price.’
His remarks shed new light on why Singapore-listed Z-Obee Holdings, which had sought a dual primary listing in Hong Kong by way of introduction last year, recently revised its proposal and is now seeking to list there by way of public offer instead, offering up to 78 million new shares and 20-40 million existing shares held by a substantial shareholder.
In December, there was speculation that Hong Kong could temporarily halt such listings after the share price of several firms that listed there by way of introduction surged on their debut there. China XLX Fertiliser, a Singapore-listed Chinese company, saw its share price double in intraday trading in Hong Kong when it made its dual-listing debut on Dec 8.
On Dec 15, The Standard newspaper in Hong Kong, citing its own sources, reported that the securities regulator was worried about the unusual share-price movements of firms listed in Hong Kong by way of introduction, including China XLX, and had urged the stock exchange operator to review the system.
‘You have to assure the exchange that there is an adequate supply of shares’ to meet the expected demand from investors, Mr. Fok said yesterday, although he was not referring to any specific firm.
Asked what would be considered adequate, he said that interested firms would ‘have to talk to our regulatory colleagues’.
There is ‘no moratorium’ on listings by way of introduction, said KC Chan, Hong Kong Secretary for Financial Services and the Treasury. But applications will be vetted to make sure that there are ‘enough stocks to satisfy the demand of Hong Kong investors, to reduce volatility’, he added.
Yesterday, China-based Z-Obee - which designs and makes mobile phone handsets - said that it had just submitted its revised proposal for a dual listing to the Hong Kong stock exchange. Shareholders will vote on the revised proposal at a special meeting on Feb 11.
Hong Kong has become an increasingly popular listing venue for companies seeking to raise money from investors hungry for exposure to the fast-growing Chinese economy.
On Jan 7, two more Singapore-listed China-based firms - Epure International and Novo Group - said that they planned to seek a dual primary listing in Hong Kong.
Epure said that it would offer up to 430 million new shares for sale. Novo Group, meanwhile, said on Jan 13 that it would sell up to 88 million shares - comprising new shares and treasury shares - to increase its public float to prepare for its dual listing in Hong Kong.
Asked if HKEx was pursuing a strategy of attracting firms already listed on other exchanges to also list in Hong Kong, Mr. Fok said that securities brokers and corporate advisory firms ‘are doing the work for us’.
‘We have heard that they are talking to some companies,’ he said, but added that it was ultimately up to firms to decide whether to seek a dual listing.
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