The three-year profit requirement will be raised from HK$50mn to HK$80mn, compared to the HK$125mn or HK$150mn options proposed in November.
HKEX (Hong Kong Exchanges and Clearing) has decided to water down its proposal to raise the profit qualification for a Main Board listing, the SCMP reports.
The exchange operator issued a consultation paper in November 2020, proposing to more than double the profit requirement for Hong Kong listed companies to improve the quality of companies seeking to list in the city.
The proposal was met with strong opposition, including from sponsor firms who said it would reduce Hong Kong’s competitiveness, prevent many SMEs from listing, and adversely affect financial advisers, legal practices and accounting firms, among other support businesses.
HKEX is also said to have received “overwhelming opposition” from stockbrokers, accountants and legislators.
According to the SCMP, HKEX has yielded to the opposition, and now plans to raise the profit requirement to HKD 80 million in combined profit over three years prior to listing, compared to the current HKD 50 million requirement.
The consultation had proposed to raise the three-year profit requirement to either HKD 125 million or HKD 150 million.
The Covid-19 pandemic, which has dented corporate earnings and prompted Hong Kong’s worst recession on record, was a major consideration for HKEX in paring back its plan.
Under the new plan, HKEX will also reportedly allow companies to apply for waivers from the profit requirement on merit.
The consultation conclusions will be formally released after approvals are obtained from the SFC (Securities and Futures Commission).
A reboot of the GEM market for growth enterprises is also under way to help SMEs raise capital on the smaller board.