Hong Kong Issuers Seek to Boost Trading in Overlooked Stocks
(Bloomberg) — Hong Kong stock issuers are seeking to boost trading in some stocks that have suffered from weak volume, which they say is hurting companies’ ability to access financing through follow-on offerings.
KC Chan, president of the Hong Kong Chamber of Listed Companies, said they had targeted more than a thousand Hong Kong-listed companies, including some based outside the city, with recommendations to increase investor coverage. He said a new group of experts within the chamber would also make recommendations to companies looking to raise funds in the city.
“While major companies have an army of professional parties, many more firms from abroad would welcome some help as they explore Hong Kong as a marketplace,” Chan said at a news conference on Friday.
Hong Kong stock listings are on the rise again this year, driven by companies in the artificial intelligence supply chain. With nearly 400 companies on tap, initial share sales in Hong Kong will reach $43 billion this year, the highest in six years, according to Bloomberg Intelligence. While the majority of potential issuers are from mainland China, some companies from the rest of Asia and the Middle East are also lining up.
Among nearly 2,500 firms listed on the Hong Kong stock exchange, more than 1,000 had market capitalizations below HK$500 million ($63.8 million), the listing threshold. Most trade less than HK$100,000 a day, according to data compiled by Bloomberg.
The Chamber’s new panel will focus largely on providing guidance to small regional firms before they list, offering free advice and promoting access to investment bankers, lawyers and auditors.
Alan Fung, a member of the chamber’s expert group, said companies outside the hottest sectors such as artificial intelligence and robotics often suffer from a lack of market interest, limiting their ability to benefit from investment bank coverage and financing options and increasing compliance costs.
Earlier this year, the exchange proposed lowering the market value threshold for dual-class listings to boost the city’s appeal as a fundraising hub, while requiring companies to show a “novelty feature” in their applications.
While the industry largely supports relaxation, HKEX needs to allow flexibility when finalizing rules, according to Chan. He said the proposed definition of “innovation” risked being overly restrictive for only a handful of fast-moving innovators, whose business models could be completely overhauled every few months.
Chan added that the dual-class share regime should focus on helping founders maintain control after successive funding rounds to maintain their unique advantage, as high market caps already serve as sufficient guardrails.
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