The turf war between the Securities and Futures Commission (SFC) and Hong Kong Exchanges and Clearing (HKEx) has caught public attention on the mainland.
I have worked for 25 years as a listing sponsor for many companies in Hong Kong, and have deep understanding of the power tussle over new listings between the two.
The power to approve listings was almost transferred to the SFC between 2000 and 2003.
But the plan was shelved in the face of disputes among various stakeholders, and HKEx also made some compromise, giving rise to a dual-listing system.
Under this system, all filings by listing applicants goes to the HKEx, but the SFC gets a copy, too.
Though the stock exchange has the final say in listing approvals, the SFC participates indirectly by raising questions and giving its opinions.
In recent years, various issues have cropped up regarding the business and financial condition of firms listed on the Growth Enterprise Market as well as the underwriting process of new shares, sparking the concern again that HKEx will allow a slack listing approval process in its pursuit of listing fees and bigger profits.
Whether such accusation holds remains controversial.
Being a commercial organization, HKEx could be credited for being less bureaucratic.
As the current listing approval system is relatively flexible, the industry is unlikely to welcome any changes.
However, I believe deeper involvement of the SFC in the listing process makes sense, since the current system has been abused more or less.
Some kind of reform is needed, but how?
My opinion is the authorities should tighten listing rules and raise the listing threshold to block low-quality companies.
We also need to guard against dodgy practices adopted by mainland players who have brought their market manipulating tricks to Hong Kong.
Looking into the future, only by fully integrating into China’s economic development can the local bourse better serve the financing needs of China.
This article appeared in the Hong Kong Economic Journal on Aug. 12.
Translation by Julie Zhu with additional reporting
[Chinese version 中文版]
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