Hong Kong Exchange to consult on new board for dual-class shares next month

HONG KONG (REUTERS) - The Hong Kong stock exchange will begin a public discussion next month over whether to establish a trading board for young companies and firms with non-standard share structures, the bourse's chief executive officer said on Friday.

The discussion comes amid general debate about Hong Kong's corporate governance rules and attractiveness as a listing destination, sparked by Chinese e-commerce firm Alibaba Group Holding favouring New York over Hong Kong for its record US$25 billion (S$34.6 billion) initial public offering (IPO) in 2014.

Hong Kong was the world's biggest IPO venue last year but has struggled to attract technology and so-called new economy companies due to its profitability requirements and ban on weighted voting rights, which many tech firms prefer.

Speaking at Hong Kong Venture Capital Association China Private Equity Summit, Charles Li, CEO of Hong Kong Exchanges and Clearing Ltd (HKEX), said the "New Board" would complement the main board and Growth Enterprise Market, and allow the bourse to attract prospective new economy listings.

"We have not been the exchange of choice, the market of choice of new economy and emerging companies. We are now addressing those issues head on," said Mr Li.

He said the bourse aims to begin consultations next month on establishing a New Board which would address two principle issues: pre-profit companies and companies with weighted voting rights structures.

HKEX's previous effort to allow such firms to list on its main board failed to win support from the Securities and Futures Commission. The regulator, however, has said it supports public discussion on HKEX's new proposal.

The New Board would boost Greater China's private equity market, allowing private equity and venture capital investors to list firms in their home market where valuations can be higher than New York.

Mr Li said the bourse was also planning a private market for unlisted firms using blockchain distributed ledger technology, which would potentially launch before the New Board. The market, which would mimic a similar platform operated by Nasdaq in the United States, would allow investors to better track their private shareholding.

"We want to provide essential services to new, early stage companies in registration, transfer, settlement and ... low frequency transfer of shares," Mr Li said. "We want to provide a central place where equity investment can be made in an exchange-sanctioned place."