Editorial | Stock exchange reforms set up Hong Kong for success
The Hong Kong exchange actively smoothing market operations to entice investors is an encouraging sign for a prosperous future
The narrowing of the trading spread for about 300 stocks aims to lower transaction costs and increase turnover. Essentially, it means lowering further the minimum price change for a stock being traded to narrow the spread between the bid and ask prices. It might not mean much for small retail investors, but for large traders and international investors dealing with large amounts of shares, it could translate into real savings.
Meanwhile, the stock exchange has made it easier for companies to launch local IPOs by reducing the public float requirement. For companies that are already listed on the mainland, the minimum float for a Hong Kong IPO has been set at HK$3 billion (US$386 million) or 10 per cent of their outstanding capital, which is down from the current 15 per cent. For smaller companies, the new requirement will range between 5 per cent and 25 per cent, depending on their market value.
Given the current geopolitical risks and market uncertainties, many mainland Chinese firms no longer look overseas, especially the United States, for secondary or primary listing. Instead, in what has been called a “homecoming”, an IPO in Hong Kong is seen as a much safer and more efficient route to raise capital.
That, of course, has greatly contributed to the current IPO bonanza, which is expected to continue for the rest of the year.