Equity Securities

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How can investors know what companies are planning to list on SEHK soon?

Investors may go to the “Application Proof & PHIP” section of the HKEXnews website or the GEM website for information.

An Application Proof is a draft listing document that is submitted with a listing application to the Stock Exchange (or to the Securities and Futures Commission in the case of a relevant collective investment scheme) and it will be published on the HKEXnews website or the GEM website (as the case may be) when submitted to the Exchange.

A PHIP is a near-final listing document which provides information about an applicant before it issues its final listing document.

With effect from 1 October 2013, the Main Board Listing Rules and GEM Listing Rules require listing applicants to publish their Application Proofs and Post Hearing Information Packs (“PHIPs”) on the HKEXnews website or GEM website (as the case may be).

As part of the transitional arrangements, the requirement to publish an Application Proof will be suspended from 1 October 2013 to 31 March 2014 (both dates inclusive). However, a PHIP is required to be published during such suspension period.

It should be noted that neither the Application Proof nor the PHIP constitutes a final listing document. Investors should not make investment decisions based on information in an Application Proof or a PHIP; but they should read the final listing document subsequently issued by the applicants, which together with other announcements about the offer are posted on the HKEXnews website or GEM website (as the case may be) upon listing.

How can investors obtain prospectuses for IPO?

Investors can search for the prospectuses and announcements from the Listed Company Information section on the HKEXnews website or issuers’ website. They may also check with the sponsor or underwriter or receiving banks for details about the application procedures.

To apply for Hong Kong Public Offer Shares, investors can contact their brokers or custodians to submit EIPO applications on their behalf through HKSCC’s FINI system or apply for new shares via e-White Channel provided by White Form eIPO service provider.

How can investors apply for new shares electronically?

Investors can subscribe for new shares electronically through one of the following channels:

The designated website of the White Form eIPO service provider appointed by the newly listed company (a newly listed company may appoint a designated service provider to provide White Form eIPO services);
Investors can contact their brokers or custodians to apply for new shares electronically via HKSCC’s EIPO Channel through the FINI system.

If an investor applies via the first channel, refund for surplus application monies are effected through bank transfers or by cheque. Please contact the relevant White Form eIPO service provider for information.

If an investor applies via the second channel, the broker or custodian will arrange refund to the investor’s designated bank account subject to the arrangement between them.

What are multiple applications?

In Hong Kong public offerings, an application is liable to be rejected if the investor has made more than one application (even for joint name application).

How can investors know IPO allotment results?

Investors can search for IPO allotment results from Listed Company Information under the HKEXnews website . They can also ask the relevant share registrar about the results. Information on how to contact share registrars can be accessed at the “List of Equities Securities ” in “Equities ” under the section headed “PRODUCTS” on the HKEX website. Newly listed companies may also announce allotment results on their own websites. Arrangements for the announcement of allotment results are set out in prospectuses.

What is the allotment basis?

The allotment basis depends on the number of valid applications for subscription for the IPO shares. Normally, the share registrar appointed by the issuing company first screens out multiple, incomplete or wrongly filled applications. Then, shares are allotted according to the basis of allocation as determined by the sponsor and the newly listed company. In the event of over-subscription, the newly listed company must increase the number of shares in the public subscription tranche by transferring shares from the placing tranche (if there is a placing tranche) by virtue of the claw back mechanism. Investors should refer to the relevant section in the prospectus.

What should investors do if the subscribed for a new share issue and received neither share certificates nor refund after trading in the company's shares had started?

In applying for shares, investors should note how and when the results of applications will be announced. These are stated in the prospectus. If investors fail to receive any notice after the stated time, they should check with their relevant White Form eIPO service provider or broker/custodian and further check with the sponsor or the share registrar of the new issue if necessary.

What are equity securities? What are the differences between ordinary shares and preferred shares?

Equity securities, generally referred to as shares, comprise ordinary shares and preference shares. Most of the equity securities listed on the Stock Exchange (the Exchange) are ordinary shares, which account for most of the turnover of the Exchange.

Ordinary shares and preferred shares are equity shares issued by a company to shareholders. Ordinary, or common, shareholders (ie holders of ordinary shares), being owners of the company, have voting rights and receive dividends at the discretion of the company. However, the payment of dividends is not mandatory, even if a company records a profit in the year.

Preferred shareholders are entitled to a preferential distribution out of profits prior to any distribution to the ordinary shareholders. Preferred shareholders have no voting rights and receive fixed dividends (ie the dividend does not increase, even if the company's profit increases). Preferred shareholders also have a claim on corporate assets in the event of liquidation which ranks ahead of ordinary shareholders but behind that of the company's creditors. Preference shareholders may receive additional dividends if the profits are sufficient. Cumulative preference shares carry forward the right to profits to following years if there are insufficient profits to pay the holders in any one year.

What factors would affect share price movements? What risk factors should investors consider before buying shares?

There are numerous factors that may affect share prices, including macro-economic factors such as changes of exchange rates and interest rates as well as costs of capital, etc. Business cycles of different industries, company profits, investors’ expectations and supply and demand in the market also will affect share prices. In addition, investors must remember that active trading in listed securities cannot be guaranteed. Investors should consider their risk appetite and objectives cautiously before making an investment decision.

What are P/E Ratio and dividend yield?

The Price Earnings Ratio (P/E Ratio) is the multiple of earnings at which a share is selling. It is determined basically by dividing the current share price by the earnings per share. P/E Ratio is usually computed with the company’s earnings from its most recent financial year but can also be computed with the estimated earnings for its next full year results. A higher multiple, or P/E Ratio, means investors have greater expectations for future growth and are willing to pay a higher share price. It can be useful to compare the P/E Ratio of a company to another in the same industry, to the market in general or to the company’s own historical P/E Ratios.

Dividend yield is the dividends per share in the most recent financial year as a percentage of the current share price. This provides a tool to compare the relative attractiveness of various dividend-paying stocks or other investments such as bonds or bank deposits.

What is ex-dividend? How does it affect the share price?

Ex-dividend means without dividend entitlement. Dividends are paid on a set date to shareholders recorded in the books of the company on a specified date, known as the record date. Because of the T+2 settlement arrangement, shares go ex-dividend, which means that investors who buy on or after the day, known as the ex-dividend date, are not entitled to the dividend declared before the ex-dividend date. Other factors remaining equal, the share price will normally drop on the ex-dividend date by an amount equivalent to the amount of the dividend.

What are the differences between the par value, book value and market price of a share?

Par value is the face value of a share shown on the face of the share certificate. Par value of a share usually has little relationship to its current market price. Book value is the amount of net assets belonging to the shareholders of a company based on its balance sheet value. A company’s book value might be higher or lower than the market price which is determined by, among other things, the supply of and demand for the shares.

What are the characteristics of securities traded under the Pilot Programme, which was introduced by HKEX in 2000?

Securities traded under the Pilot Programme have the following characteristics:

Listed on Nasdaq or the American Stock Exchange;
May include a number of Exchange Traded Funds;
Have no public offering in Hong Kong;
Not regulated as listings on the Stock Exchange’s Main Board or GEM;
Admitted into the Stock Exchange for trading only;
Trading of Pilot Programme securities is regulated by Hong Kong laws and the Stock Exchange rules. In particular, the securities are subject to the market manipulation provisions of the Securities and Futures Ordinance; and
In general, suspension and resumption of trading follows the decisions of the home market of Pilot Programme securities, but the Securities and Futures Commission and the Stock Exchange retain the right to suspend and halt trading and delist any security.