Listing in Hong Kong becomes more convenient, which companies can benefit?

On October 16, Hong Kong Special Administrative Region Chief Executive John Lee released the "Chief Executive's 2024 Policy Address," which explicitly proposed further optimization of the securities market, including attracting overseas capital, encouraging corporate listings, optimizing listing approvals, and improving market efficiency.

Just two days after the policy address was released, $HKEX(00388.HK) and the Hong Kong Securities and Futures Commission issued a joint statement on October 18, announcing the optimization of the new listing application approval timeline to further enhance Hong Kong's appeal for IPO fundraising. The swift implementation of this optimization is remarkable.

Listing on the Hong Kong Stock Exchange typically involves the following steps: application submission - review - hearing - roadshow - IPO - pricing and allocation based on performance - gray market trading - official listing.

This optimization focuses on the approval process for listing applications.

Potential Reduction in Approval Time

Under the current framework for approving new listing applications, the Securities and Futures Commission (SFC), as the statutory regulator, reviews all new listing applications under the "Securities and Futures (Stock Market Listing) Rules" and the "Securities and Futures Ordinance," and takes targeted intervention actions for serious regulatory matters. The Hong Kong Stock Exchange (HKEX), as the frontline regulator, assesses listing suitability under the "Listing Rules" and provides feedback on the applicant's eligibility, suitability, and material disclosures in the listing documents.

In the past, the approval cycle for Hong Kong listing applications typically took 4-6 months, or even half a year to a year (mainland Chinese companies first needed approval from the China Securities Regulatory Commission). This optimized process, through close collaboration between the SFC and HKEX, aims to avoid redundant inquiries and shorten the approval time.

If the new listing application and supporting materials submitted by the applicant and its sponsor comply with the above rules, the SFC and HKEX will each issue up to two rounds of regulatory feedback (confirmed within 40 business days) to assess whether there are significant regulatory concerns.

After confirming no major regulatory concerns, HKEX will work with the applicant and its sponsor to finalize the listing document disclosures, and the application can proceed to the listing committee hearing. The applicant and its sponsor are expected to provide satisfactory responses to regulatory feedback within approximately 60 business days in total, meaning the entire process of regulatory inquiries and responses may take around 100 days, significantly shorter than the previous approval cycle.

(Image: Optimized approval process timeline. Source: HKEX)

Data provided by HKEX shows that as of September 30, 2024, the median total business days required for main board listing applicants from submission to listing committee hearing was 137 days over the past 12 months. The optimized approval process is expected to shorten this timeframe.

Expedited Approval for Eligible A-Share Companies

Additionally, the SFC and HKEX introduced expedited approval for eligible A-share companies. A-share-listed companies submitting new listing applications in Hong Kong that meet the following criteria—1) expected market capitalization of at least HKD 10 billion; and 2) confirmation of full compliance with A-share listing regulations in the two full fiscal years prior to submission—qualify for expedited approval:

1) For fully compliant applications, the SFC and HKEX will each issue only one round of regulatory feedback, with assessments completed within 30 business days;

2) For partially compliant applications, feedback will be issued within no more than 40 business days;

3) If the application raises significant regulatory concerns, expedited approval will not apply.

This year, several large A-share companies have already listed or plan to list in Hong Kong, including recently listed $MIDEA GROUP(00300.HK) , as well as $SF Holding(002352.SZ) (market cap over RMB 200 billion), $Drinda(002865.SZ) (market cap RMB 10.7 billion), and Chifeng Gold (600988.SH) (market cap over RMB 30 billion), which submitted listing applications in June, October, and August, respectively. Additionally, $HAI TIAN(603288.SH) (market cap RMB 200 billion) is reportedly considering a Hong Kong listing.

The expedited approval process for A-share listings is expected to attract more high-quality A-share companies to pursue dual listings in Hong Kong and mainland China (A+H). Wind data shows that 149 companies currently have A+H dual listings, and this number is likely to grow.

HKEX data reveals that as of the end of 2023, there were 71 pending or resubmitted applications, with 108 new applications received this year, totaling 179. Of these, 42 companies listed between January and September 2024, 16 received listing committee approval pending listing, 80 are under review, and 41 were either expired, rejected, returned, or withdrawn.

Which Companies Benefit?

This policy positively impacts A-share companies planning Hong Kong listings that meet the market cap and track record requirements, enabling them to achieve their listing goals more efficiently. It may also attract companies hesitant about their listing destination to choose Hong Kong.

Investors in the Hong Kong market benefit from a broader selection of investment targets.

However, HKEX is the biggest winner. By streamlining the listing process, HKEX enhances its competitiveness, attracting more high-quality A-share companies and positioning itself as the preferred listing venue for unlisted firms.

HKEX's comprehensive strength is highly recognized by the capital markets, with a current market cap of HKD 394.3 billion and a year-to-date stock price increase of over 20%. It consistently ranks in the "Hong Kong Top 100," placing 50th in the overall ranking last year. With this year's "Hong Kong Top 100" awards approaching, will HKEX climb higher? Stay tuned.

The "Hong Kong Top 100" awards, launched in 2012 by Tencent and Financial Times, use big data and scientific metrics to evaluate Hong Kong-listed companies' performance, aiming to provide investors with benchmarks and promote the healthy development of Hong Kong's capital markets.

Author: Mao Ting