/ Startups

What startups should know about Hong Kong’s Listing Framework

As you may already be well-aware, the Hong Kong Exchanges and Clearing Limited (HKEX) is currently in deliberations over implementing a third board.

Traditionally, access to IPO has been restricted to financial and property sectors. The new scheme, which was published as the New Board Concept Paper earlier in June this year, would effectively grant start-ups and tech firms with dual-share structure, coined “new economy” companies, the power to list. With the consultation ending in August 18th this year, Charles Li hosted a talk as part of KPMG’s Capital Markets Speaker Series. Charles is the current Chief Executive of Hong Kong Exchanges and Clearing Limited (HKEX).

A quick refresher: Hong Kong currently has two boards. The Main Board currently sets the benchmark at HK $50 million (US $6.42 million). On the other hand, the barrier to entry for the Growth Enterprise Market (GEM) hovers around HK$20 million and mainly targets SME’s.

So why the need for a third board, which would seemingly complicate things further?

It all comes down to maintaining Hong Kong’s economic competitiveness.

Despite maintaining a track record for ranking as the best market for IPO funds in five out of eight years, companies are disproportionately skewed towards financial and property sectors. Unlike the NASDAQ (60%), the New York Stock Exchange (47%) and the London Stock Exchange (15%), New Economy companies make up a meager 3% of total market capitalization in Hong Kong.

In his talk on Wednesday, Li maintained that Hong Kong’s relatively low exposure to fast -growing companies is detrimental to securing investor interest. What’s more, the Hong Kong IPO market faces intense competition from Mainland listing counterparts (to the likes of National Equities Exchange and Quotation and ChiNext). In the first part of his talk, Li riffed on how international issuers come to Hong Kong for capital, and how we must heed this trend as China continues to move towards a capital-excessive economy.

Using the analogy of the need to create an ecosystem of “ fertile soil”, Li went on to discuss how it would be almost irresponsible to not help companies that are strapped for capital. “New economy” companies fall in the following brackets of 1) pre-profit, 2) non-standard governance features, and 3) Mainland companies that wish to list on the Exchange as a secondary listing venue. He anticipated that the new board would be met with resistance, but encouraged those who take issue with it to think long and hard about the tradeoffs of not having it.


Money talks in this city. Unless an early-stage company has a profoundly good idea, vision, innovation, IP and patent, it is unlikely that they will emerge as winners and access capital. They would fare better by not appealing to the public, Li added.

In the Q&A, Li also mentioned plans to launch a Hong Kong Private Market, which is geared towards a shared registrar and transfer for startup companies. The Exchange is currently soliciting market feedback over the next two months. You can read the full provisions in the brief here.

You may be thinking, why should this matter to me?

We are on the cusp of a pivotal moment, where late stage startups in the biotech, healthcare, internet software industries now have a fighting chance to navigate an untapped, public capital market. While startups will doubtedly be delisted if they are unable to meet specific thresholds requirements, there is no doubt that exciting times lie ahead.