Hong Kong must woo mainland tech firms, boost small firms’ market turnover: chamber
News Summary
The Hong Kong Chamber of Listed Companies (HKCLC) chairman recommended that the Hong Kong government attract up-and-coming mainland technology companies to move part of their operations to the city and introduce measures to boost the market turnover of smaller listed companies. These recommendations were floated to Chief Executive John Lee Ka-chiu during a consultation session ahead of his Policy Address. HKCLC Chairman Chan Ka-keung noted that while Hong Kong's listing reforms have attracted many mainland tech and biotech firms to list, the chamber wishes to see these firms use some listing proceeds to set up offices or relocate business activities to Hong Kong, thereby generating local job opportunities and supporting the city's economy. Hong Kong Exchanges and Clearing (HKEX) introduced reforms in 2018 allowing companies with multiple classes of voting rights and pre-revenue biotech firms to list. This was followed by Chapter 18C in March 2023, which permits large tech companies to list even without revenue.
Background
Hong Kong, as an international financial hub, has actively sought to attract more technology and biotechnology companies, particularly from mainland China, through listing reforms in recent years. HKEX amended its listing rules in 2018 to allow companies with weighted voting rights and pre-revenue biotech firms to list in Hong Kong. Subsequently, in March 2023, HKEX further introduced Chapter 18C of the Listing Rules, aimed at attracting more large advanced technology companies to list, even if they are not yet profitable. These initiatives seek to enhance Hong Kong's capital market attractiveness and competitiveness, especially amidst intensifying global technological rivalry.
In-Depth AI Insights
What are the deeper strategic motives behind Hong Kong's push to attract mainland tech firms? While creating jobs and supporting the local economy are stated goals, deeper strategic motives likely include: - Solidifying Financial Hub Status: By attracting high-growth tech companies, Hong Kong aims to maintain its position as Asia's leading financial center and offer more diversified investment opportunities, reducing reliance on traditional finance and real estate. - Strategic Economic Repositioning: Facing global geopolitical shifts and regional competition, Hong Kong is seeking to deepen its economic integration with mainland China, positioning itself as a crucial platform for mainland enterprises to "go out" and "come in." - Boosting Market Liquidity and Vitality: Enhancing the market turnover of smaller listed companies aims to improve overall market liquidity and attractiveness, which is vital for a healthy capital market. What potential challenges do these efforts to attract and retain mainland firms face? Despite proactive policies, these efforts may encounter multiple challenges: - Geopolitical Risks and Capital Controls: US-China tensions could impact the international business layout of some mainland tech companies, while strict mainland capital controls might limit the free flow of funds and the willingness of enterprises to operate in Hong Kong. - Operating Costs and Talent Competition: Hong Kong's high operating costs and global talent competition may diminish its appeal for mainland companies to relocate core operations, especially given more favorable policies offered by other cities within the Greater Bay Area. - Market Positioning and Differentiation: Hong Kong needs to offer a unique value proposition among numerous international and mainland exchanges; listing rule reforms alone might not be sufficient to retain companies' core businesses long-term. What are the long-term implications for Hong Kong's capital market and relevant investors? If successful, these strategies could yield positive impacts; otherwise, they might exacerbate existing issues: - Success Scenario: A significant influx of mainland tech companies establishing operations in Hong Kong would substantially increase the tech sector's weighting in the market, attract more international capital, and potentially drive the development of related service industries, boosting overall market valuations. - Failure Scenario: If companies merely use Hong Kong as a listing vehicle rather than an operational center, the market will lack real economic backing, liquidity issues might persist, and market reliance on a few large-cap stocks could intensify, increasing investment risk. - Structural Risks: The market could face more severe industry concentration problems, with increased dependence on the tech sector, making it more susceptible to specific industry cycles and policy changes.