HONG KONG - The Hong Kong Exchanges and Clearing Limited (HKEX) is facing criticism over its perceived lack of substantial reform to the Growth Enterprise Market (GEM). Despite recent proposals following a six-week public consultation, industry leaders argue that the measures fall short of revitalizing the platform, which has not seen an initial public offering (IPO) since Grand Power Logistics Group's listing in January 2021.
Arnold Ip from Altus Holdings, along with other market experts, expressed concerns today that GEM is losing its competitive edge against more efficient systems such as Nasdaq and mainland exchanges like the Shanghai Star Market. They point out the slow approval process on HKEX, which now often exceeds a year, pushing companies towards alternatives for faster access to public funds.
HKEX's GEM currently hosts 328 companies with a combined market value of HK$53 billion. However, industry insiders are advocating for more radical changes, suggesting the creation of a new board modeled after the Beijing Stock Exchange that would incorporate firms from the National Equities Exchange and Quotations (NEEQ).
Proposals to ease quarterly reports and introduce alternative eligibility tests have been deemed insufficient by critics who demand streamlined listings and back-door listing opportunities to inject new life into GEM. The high fundraising costs faced by SMEs, such as those experienced by Grand Power Logistics Group which raised HK$55.5 million in its IPO—the last on GEM—are also highlighted as significant barriers.
Quam Capital points out the shortcomings of GEM's competitiveness, echoing concerns about restrictions on reverse takeovers that hinder capital infusion into GEM-listed firms. Deloitte China’s vice-chair previously pointed out similar issues with GEM's ability to attract and retain listings. Meanwhile, the Institute of Securities Dealers calls for policies that support new capital infusion into existing GEM businesses through reverse takeovers or other mergers and acquisitions.
The collective feedback from industry professionals underscores a growing consensus that while HKEX has made some progress, more decisive action is needed to ensure GEM can effectively support small and medium-sized enterprises in their growth trajectories and remain a viable option amidst global competitors.
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