Hong Kong’s Listing Reform and New Economy Listings
May 12, 2021
As a unique global financial centre, Hong Kong has always been attractive to issuers.
Christina Bao
Head of Market Development

QJ: Qian Jie (Host)

Christina: Christina Bao (Guest)


QJ: Welcome to HKEXVoice, our new podcast series, which shares with you, the thoughts and insights of our senior executives and decision makers about HKEX and Hong Kong’s financial markets.  

I’m your host, Qian Jie, from HKEX’s Corporate Communications team.

In 2018, HKEX launched the most important listing reform in decades, for the first time welcoming listings from New Economy companies with weighted-voting rights (WVR) and pre-revenue biotech companies, as well as secondary listings of overseas-listed Mainland companies.

What changes have been brought about by the new Listing Regime over the past three years? Today, we have Christina Bao, HKEX’s Head of Market Development and Head of Global Issuer Services, with us to discuss Hong Kong's listing reforms and its impact on our markets.

Christina, welcome to our podcast!

Christina: Glad to be here.

QJ: HKEX just celebrated the third anniversary of its new listing regime at the end of April. I learned that your team prepared some useful market data and analysis. Could you please share some highlights with us, especially on the changes that the new Listing Regime has brought to our market?

Christina: Sure. The real change here is probably the structure, and the composition, of the entire Hong Kong equities market.

We launched the new listing regime three years ago amid the latest market developments, especially with regards to the emergence over the last two decades of New Economy companies with high growth potential.

Christina: Since then, Hong Kong’s capital market has become crucial in supporting the development of the New Economy sector.

In the first quarter of this year, over 90% of IPO funds raised were by New Economy listings. Another useful data point is that the total market capitalisation of New Economy companies listed on HKEX since the new listing regime took effect reached over HK$14 trillion, accounting for 27% of Hong Kong’s total market capitalisation.

Regarding diversity of sectors, we have seen many medical and healthcare companies list in Hong Kong since the Covid-19 pandemic. What we have seen is a set of new valuation models for New Economy companies that are different from the traditional ones, and changes in investment preferences follow. All these factors contribute to the creation of an increasingly well-developed New Economy ecosystem.

QJ: In the New Economy space, the internet sector is probably the one that nobody should ignore. With all the big names like Alibaba, JD.com and Baidu that have been listed in Hong Kong, what are the factors that you think are making the Hong Kong market so attractive to these “homecoming” IPOs?

Christina: As a global financial centre, Hong Kong is attractive to issuers for a number of reasons. First, it is a free and rule-based market. In this free, open and highly adaptive capital market, we have very clear listing requirements and rules for issuers to follow.

Second, from the perspective of market competitiveness, the Hong Kong market is very deep and liquid – such liquidity is a combination of both Chinese and international capital, and with investors from all over the world.

Third, Hong Kong is a natural destination for Chinese companies eyeing a “homecoming” IPO. Here, Chinese investors are already very familiar with the brands and businesses of these companies.

QJ: In addition to the internet sector, the biotech sector is another highlight of the listing reform, as we have added a new chapter, Chapter 18A, to allow the listings of pre-revenue biotech companies that meet our listing requirements. How important is this reform to the development of the biotech industry and ecosystem in Hong Kong?

Christina: As you know, the investment cycle of the biotech industry is very long, and the amount of investment capital needed is also particularly large. At the same time, biotechnology investment requires knowledge of basic science or research and development (R&D) capabilities.

We launched Chapter 18A to take into account these industry characteristics. So far, we have achieved great initial success, in terms of IPO funds raised, the number of companies that have receive the financing they need, as well as the support an HKEX listing provides at the later stages of these companies’ development.

QJ: How has Hong Kong’s Biotech ecosystem developed since 2018?

Christina: We basically started from scratch, as there were very few real biotech companies listed in Hong Kong before the launch of the listing reform. In the past three years, the financing amount from these companies reached over US$10 billion, while their re-financing amount reached about US$8 billion, helping Hong Kong develop into the world’s second largest biotech fundraising hub.

At the same time, the listing reform has also accelerated the development of the entire listed medical and healthcare sector in Hong Kong, with an IPO fundraising amount of about US$18 billion. The total market capitalisation of the sector reached HK$3.5 trillion, with an average annual growth rate of more than 60% over the past three years – becoming the fastest growing sector in our market.

In addition, from a broader perspective, we are seeing continued increase in market participation and recognition.

QJ: The fundraising amount of Hong Kong’s IPO market in Q1 this year reached a record high, and the majority of the newly-listed companies were from the New Economy. Do you think those trends will continue throughout the second half of this year? Which sectors do you think will be the most popular in the IPO market this year?

Christina: There is a saying in this industry: There are excellent years, and there are good years in the IPO market. This means that, if the performance is outstanding this year, next year’s performance might be less impressive. But I am glad to say that we have had three excellent years in terms of IPO fundraising. From my observation, 2021 is likely to continue as another excellent year.

It’s very important to note that Hong Kong’s capital market has developed to better facilitate the listings of New Economy companies, which are increasingly becoming a key driving force of economic growth.

We constantly reflect on our propositions in order to maintain our market’s continued attractiveness. On one hand, we see very diverse New Economy businesses in Hong Kong, which have been performing well lately and so we believe more enterprises will follow suit.

On the other hand, we are also seeing some new sectors in the markets, such as AI, big data, drug discovery and new energy. So there are tremendous changes happening in the business models, which we believe will bring new opportunities, and in turn bring more potential issuers to our market.

QJ: Thank you for sharing this great news with us, Christina.

Christina: Thank you, Qian Jie.

QJ: Over the past three years, Hong Kong’s new Listing Regime has allowed New Economy companies to build up a strong foundation in Hong Kong’s capital market, enabling the city to become the go-to listing venue for New Economy companies. In the future, HKEX will continue to review the Listing Regime to enhance the competitiveness of its IPO market.

From all of us at HKEXVoice, thank you for listening. If you would like to learn more about our new listing regime, or the listing processes in Hong Kong, please visit our HKEX website at www.hkex.com.hk.