Hong Kong Exchanges and Clearing (HKEX), which recently reclaimed the crown as the world’s largest market for new listings, announced new rules on Friday to reduce the public float requirement for initial public offerings (IPOs).
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The new rules lower the barrier to raise capital for companies that are already listed in mainland China. Starting Monday, the minimum float of mainland companies in Hong Kong will be set at HK$3 billion (US$386 million), or 10 per cent of their outstanding capital, down from the current 15 per cent.
For smaller companies, the requirement will be adjusted to between 5 per cent and 25 per cent, depending on their market value, HKEX said in a statement on Friday after a three-month consultation period that received 1,253 responses.
“It is crucial that we continue to evolve our listing framework so that it remains globally competitive and fit for purpose, ensuring that we benchmark ourselves favourably against international standards to appeal to the world’s next generation of leading companies,” said HKEX’s head of listing Katherine Ng in a statement announcing the exchange’s decision.
The listing reform is expected to bolster Hong Kong’s leading position in the IPO market. Fundraising from new listings surged eightfold in the first half of this year, with 42 firms raising a total of US$13.5 billion, propelling the stock exchange’s main board to the top of global rankings for the first time since 2019, according to data from the London Stock Exchange Group.
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The new public float requirement would align Hong Kong more closely with international practices, as the previous threshold was deemed to be too high, said John Lee Chen-kwok, vice-chairman and co-head of Asia coverage at investment bank UBS in Hong Kong.