How listing reforms helped HKEX become the go-to global fundraising hub for companies of tomorrow

In 2018, HKEX implemented new listing rules that opened doors to companies from a range of emerging and innovative industries.

The new rules also changed the DNA of Hong Kong’s markets and established it as a world-leading centre for new economy companies.

Before 2018, our markets looked very different to how they look today.

Prior to 2018, the financial services and property sectors accounted for a combined 45% of Hong Kong’s market capitalisation and 41% of its total cash market turnover.

The information technology sector was prominent, with 13% of market cap and 18% of trading turnover, but this space was dominated by one or two giant companies. We knew that there was demand from some of the most exciting companies for a tailored route to market and that a change was needed.

The world around us was changing: new economy companies with ground-breaking technologies were emerging and needing capital; and investors wanted access to high-potential opportunities outside of the more traditional sectors represented on our markets.

By welcoming new economy companies to list in Hong Kong, we knew that we could create a virtuous circle: if we could attract issuers to list, we could attract investors, which could then attract more listings.

However the design of a tailored route was not straightforward, and two common characteristics of new economy companies were obstacles that needed to be overcome.

First, these companies tended to not be profitable yet, focusing instead on driving top-line growth, building expertise, scale and market share.

Second, many new economy companies had have weighted-voting rights and dual-class share structures, reflecting the fast growing way the companies had grown and founders' desire to retain influence of their ideas and IP. Both of those conditions made a listing in Hong Kong prior to 2018 very difficult.

HKEX consulted widely with market participants – regulators, listed firms, potential issuers, law firms, brokers and industry associations – on how to create a robust, attractive new listing regime with a clear regulatory framework that would attract listings, connect investors to new opportunities and contribute to the healthy development of the market ecosystem here in Hong Kong.

We delivered three new listing chapters in April 2018: 18A for pre-revenue biotech companies, 8A for weighted-voting rights issuers, and 19C for secondary listings of overseas issuers.

Since we implemented the new rules, 86 companies covered by chapters 18A, 19C and 8A have listed, raising HK$583.3billion, accounting for 41.2% of total IPO funds raised and 20.2% of total market capitalisation.

But it is the impact that the listing reforms have had on the market as a whole that has been the most far reaching: our markets have radically diversified, with many different companies in the healthcare and IT sectors listing in Hong Kong in the wake of the reforms. For example, following the listing of companies in the sector, the combined market cap of the two sectors has risen from HK$5.2 trillion at the end of 2018 to HK$12.2 trillion as of the end of March 2023.

260 new economy companies have listed in Hong Kong since the 2018 reforms, raising a total of HK$916.5 billion. The growing number of new economy companies listed in Hong Kong in turn, has led to an increase in the number and diversity of new economy-related investment products, a bigger investor base and an expansion of sell-side analyst coverage, growing the new economy ecosystem all around us.

The market is energised by the impact of the 2018 reforms: Hong Kong has become a world leader in the funding, growth, nurturing and development of new economy companies.

The desire to take this to the next step is strong, with the market supporting a continued diversification journey: there is demand to go further to connect capital with opportunities and find ways to enhance the attractiveness of our markets. Which is why we were especially pleased this year to launch our new Specialist Technology regime.

To address this, the new 18C Specialist Technology chapter includes amended listing rules that enable issuers from five specific industries: next-generation information technology; advanced hardware and software; advanced materials; new energy and environmental protection; or new food and agriculture technologies to seek a listing on Hong Kong’s markets.

We believe that our new 18C Specialist Technology regime is well-timed and we expect to see a rich pipeline of specialist technology companies to come to market in the months and years ahead.

The 2018 listing reforms show what’s possible when well-constructed reforms are introduced that reflect macro business and investor trends.

We never do this alone though – we work with the market to preserve its quality and listen to our stakeholders such reforms needs to balance progression with investor protections, and ensure that the high standards that Hong Kong is renowned for are never compromised.

Hong Kong has long been at the confluence of East and West, and today its outlook is an exciting one. At the heart of the Greater Bay Area (GBA), Hong Kong has an opportunity to be the ‘Wall street’ to the GBA’s ‘Silicon Valley’.

Already a world-renowned hotbed of innovation, new technology and advanced manufacturing, the GBA is a breeding ground for companies in the specialist technology space, and we expect to see a steady flow of applications in the future from GBA companies keen to tap international capital and burnish their reputation with the stamp of good governance that a Hong Kong listing confers.

As we look to the future – continuing our diversification journey, growing Hong Kong’s new economy ecosystem, meeting the funding needs of the companies of tomorrow, connecting capital with opportunities and driving the innovations that will empower generations to come – we are excited by the possibilities ahead for us, Hong Kong and the world.

Five questions about 18C

1. What is a specialist technology company?

A Specialist Technology Company is a company primarily engaged in the research and development of, and the commercialisation and/or sales of, products and/or services that apply science and/or technology within an acceptable sector of a Specialist Technology Industry (Specialist Technology Products).

The list of Specialist Technology Industries and the respective acceptable sectors are set out in a guidance letter (see Appendix V of the Consultation Conclusions) which will take effect on the same date as the new Rules, and will be updated from time to time.

2. In the 18C chapter, what is the difference between a Commercial and Pre-Commercial company?

A Commercial Company means a Specialist Technology Company that has revenue of at least HK$250 million for its most recent audited financial year (Commercialisation Revenue Threshold). A Pre-Commercial Company means a Specialist Technology Company which has not yet met the Commercialisation Revenue Threshold at the time of listing.

3. What is the market capitalisation standard for Commercial and Pre-Commercial companies in the 18C Specialist Technology chapter?

Commercial Companies: ≥ HK$6 billion; Pre-Commercial Companies: ≥ HK$10 billion.

4. In the 18C Specialist Technology chapter, what is a pathfinder sophisticated independent investor (SII)?

Pathfinder SIIs mean SIIs that have invested in the company at least 12 months before the date of the listing application of a Specialist Technology Company.

5. Where can I find more information about HKEX’s Listing Rules?

Learn more about HKEX’s Listing Rules here.

Read more about Specialist Technology sectors and our new 18C listing regime here.