HKEX clawback plan favors big banks, hurts small investors, says Prudential Brokerage

Prudential Brokerage has voiced opposition to the stock exchange’s proposal of lowering the cap on new shares clawed back to the public subscription tranche, citing potential harm to the interest of retail investors.

The broker, following Futu Securities International (Hong Kong)’s public objection, said that the cap cut would significantly weaken retail investors’ interest and benefit large investment banks and institutional investors more, changing the effective and fair mechanism.

Hong Kong Exchanges and Clearing (0388) proposed in a December consultation paper to allow companies being listed in the city to claw back up to 20 percent of shares it offers to the global tranche to retail investors, down from the current requirement of 50 percent, with other measures aimed to optimize the price discovery of initial public offerings.

Prudential Brokerage added that as many as 90 percent of its clients expressed strong objections to the proposed change to the clawback mechanism.

HKEX head of listing Katherine Ng Kit-shuen has said the proposal was made as the bourse operator found that only a few issues triggered the highest share reallocation mechanism.

STAFF REPORTER