Capital Calls: Hong Kong bourse sweats small stuff

3 minute read

Jan Craps (L), chief executive officer of Budweiser Brewing Company APAC Ltd, attends the listing ceremony of the AB InBev's Asia-Pacific unit at the Hong Kong Stock Exchange in Hong Kong, China, on Monday, Sept. 30, 2019. Zhang Wei/CNS via REUTERS ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY. CHINA OUT. - RC16E956B8E0

HONG KONG, May 6 (Reuters Breakingviews) - Concise insights on global finance.


SMALL-MINDED. Hong Kong is struggling to toughen up. The local bourse operated by $77 billion Hong Kong Exchanges & Clearing will dial back plans to more than double the minimum HK$50 million ($6.4 million) profit required since 1994 for public offering candidates after financiers squawked, according to media reports. Instead, companies will have to show HK$80 million of earnings over three years.

Small companies are big business for brokers. More than half the roughly 750 that listed between 2016 and 2019 would not have made the cut under the stricter changes. Meanwhile, a more than doubling of the minimum market capitalisation in 2018, to HK$500 million, has helped lead to higher prices relative to earnings for newly listed minnows. That raises suspicions that some are designed to be shell companies for later backdoor IPOs. The danger is that small fry hurt the broader market’s reputation if rules aren’t tightened. (By Jennifer Hughes)

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