The Association of Hong Kong Capital Market Practitioners (HKCMP), which launched last week and comprises 29 of Hong Kong’s smaller brokers and advisers, will nudge regulators to loosen the tight grip they have on the city’s small-cap market.
Earlier this year, bourse operator Hong Kong Exchanges and Clearing proposed reform measures for the GEM small-caps board at the local exchange that included adding an alternative eligibility test, removing mandatory quarterly reporting intervals and streamlining the process for transferring listings to the exchange’s main board.
The current policies – proposed reforms included – are not enough to support GEM, said Arnold Ip, HKCMP’s chairman and founder of Altus Capital.
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HKCMP represents investment banks, law firms and accounting firms such as Alliance Capital Group, Deloitte Advisory, Altus Capital and Masan Capital. The industry body said it will advocate for businesses of all types and sizes, and serve as a bridge between market players and regulators. It will also support the growth of small and medium-sized enterprises.
GEM was established in 1999 to make room for companies that did not meet the main board’s tougher requirements. It currently has 328 listings with a combined market capitalisation of HK$53 billion (US$6.8 billion), or 0.2 per cent of Hong Kong’s total according to exchange data.
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There have been no new listings on GEM in three years, since Grand Power Logistics Group raised HK$55.5 million in January 2021.
The Hong Kong market as a whole is expected to record 65 IPOs raising about HK$45.8 billion this year, according to a report released by Deloitte on Monday. This is a decline from the 84 new listings reported in 2022 that raised HK$99.6 billion, representing a drop of 22 per cent in volume and 54 per cent in proceeds raised.
“Continuous US interest rate hikes and a slower-than-expected Chinese economic recovery [have] sent market valuations down and constrained liquidity,” said Robert Lui, southern region Hong Kong offering services leader of the capital market services group at Deloitte China. “As a result, Hong Kong did not have any mega IPOs in 2023.