Industry leaders are raising concerns about the perceived inadequacy of the Hong Kong Exchanges and Clearing Limited’s (HKEX) reform measures for the Growth Enterprise Market (GEM). Despite recent proposals made after a public consultation, experts argue that the platform requires more significant changes to revitalize its operations. The lack of new IPOs since January 2021 has intensified the call for action.
Arnold Ip from Altus Holdings and other market professionals mentioned today that GEM is losing its competitive advantage to more efficient systems such as mainland exchanges, like the Shanghai Star Market. They highlight the lengthy approval process on HKEX, which now sometimes exceeds a year, compelling companies to seek alternative avenues for quicker access to public funds.
Currently, GEM hosts 328 companies with a combined market value of HK$53 billion. However, industry insiders are advocating for more substantial transformations, recommending the establishment of a new board modeled after the Beijing Stock Exchange, incorporating firms from the National Equities Exchange and Quotations (NEEQ).
Critics deem the proposed eased quarterly report requirements and alternative eligibility tests insufficient. They argue for streamlined listings and back-door listing opportunities as crucial steps to inject new life into GEM. The high fundraising costs faced by small and medium-sized enterprises (SMEs), exemplified by Grand Power Logistics Group’s IPO, which raised HK$55.5 million and was the last on GEM, are also cited as significant obstacles.
Quam Capital echoes concerns about GEM’s competitiveness, specifically highlighting restrictions on reverse takeovers that impede capital infusion into GEM-listed firms. Deloitte China’s vice-chair has previously raised similar issues regarding GEM’s ability to attract and retain listed companies. Additionally, the Institute of Securities Dealers calls for policies supporting new capital infusion into existing GEM businesses through reverse takeovers or other forms of mergers and acquisitions.
Industry professionals’ collective feedback reinforces the growing consensus that while some progress has been made, more decisive action is required from HKEX to ensure that GEM effectively supports the growth trajectories of small and medium-sized enterprises and remains competitive among global counterparts.
1. What is the Growth Enterprise Market (GEM)?
The Growth Enterprise Market (GEM) is a board operated by the Hong Kong Exchanges and Clearing Limited (HKEX) that provides a platform for small and medium-sized enterprises (SMEs) to raise capital through initial public offerings (IPOs).
2. Why are industry leaders criticizing HKEX’s reform efforts for GEM?
Industry leaders argue that the recent reform proposals for GEM fall short of revitalizing the platform. They point out the slow approval process and insufficient measures to attract new listings, which have resulted in a lack of new IPOs on GEM.
3. What alternatives are companies considering due to the slow approval process on HKEX?
Companies are seeking faster access to public funds through alternative avenues, such as mainland exchanges like the Shanghai Star Market, due to the lengthy approval process on HKEX.
4. How many companies are currently listed on GEM?
GEM currently hosts 328 companies with a combined market value of HK$53 billion.
5. What are some proposals made by industry insiders for GEM reform?
Industry insiders suggest the creation of a new board modeled after the Beijing Stock Exchange, which would incorporate firms from the National Equities Exchange and Quotations (NEEQ). They also advocate for streamlined listings and back-door listing opportunities to inject new life into GEM.