Date
26 May 2017
Hong Kong's securities regulators have taken a tougher stance on listed firms following wild price swings of stocks on the Growth Enterprise Market. Photo: Bloomberg
Hong Kong's securities regulators have taken a tougher stance on listed firms following wild price swings of stocks on the Growth Enterprise Market. Photo: Bloomberg

Four small firms shelve IPOs after watchdog warning

Four planned listings on Hong Kong’s Growth Enterprise Market, which is known for its wild price swings, have been shelved after securities regulators warned that participants would be scrutinized more thoroughly.

Logistics provider XiangXing International Holding Ltd. said on Monday it will postpone its initial public offering on the GEM, the city’s second exchange, after receiving inquiries from regulators, Bloomberg News reports.

Local lingerie brand My Heart Bodibra Group Ltd., swimming pool contractor Hao Bai International (Cayman) Ltd. and knitwear supplier Speed Apparel Holding Ltd. also announced this week they will let plans for GEM debuts lapse after failing to meeting listing conditions, the financial news and data provider said.

Closer scrutiny of GEM comes after years of extreme price movements, with shares rising by thousands of percent before plunging, Bloomberg said.

Charles Li, chief executive of bourse operator Hong Kong Exchanges & Clearing Ltd., said wrongdoings on GEM damage Hong Kong’s status as a financial center.

The Securities and Futures Commission signaled a tougher approach last week when it suspended shares of GME Group Holdings Ltd. on its debut trading day.

One issue concerning GEM stocks is that many have a small portion of their shares available to trade, which leads to low volumes and can exacerbate price swings, the report said.

Three of the four firms failed to satisfy a rule governing how share placements are distributed prior to trading, according to their filings.

The requirement was highlighted by the SFC and HKEX in a Jan. 20 joint statement that reminded GEM participants to ensure a fair and open market.

Shares of GME Group, a tunnel excavating subcontractor, surged 543 percent on their first day of trading on Feb. 22.

SFC suspended the stock a few hours after trading started.

Extreme moves have long been a feature of GEM stocks. Half of the 10 best first-day gainers in 2015 saw their share prices plunge by more than 90 percent from their peak within a month, the joint statement said.

A public consultation on the exchange’s future is planned this year.

– Contact us at [email protected]

CG

EJI Weekly Newsletter

Please click here to unsubscribe