Will Chinese firms ditch Nasdaq for Hong Kong?

Following the Nasdaq Stock Market's plan to raise the minimum public market value requirement for new listings to at least US$15 million (HK$117 million) and expedite the delisting process for thinly traded companies, market observers are questioning whether U.S.-listed Chinese companies might turn to Hong Kong instead.

Deloitte China Southern region managing partner Edward Au Chun-hing explained that the proposed changes primarily target smaller listed companies. He noted that the measures aim to enhance trading liquidity, broaden the shareholder base, and prevent extreme stock price volatility caused by highly concentrated ownership, which would benefit regulation and foster healthier market development.

Nasdaq also proposed that companies primarily operating in China must raise at least US$25 million in their initial public offering.

Au pointed out that while the fundraising threshold for the main board of the Hong Kong Exchange is lower than Nasdaq's new proposal, companies must still meet listing criteria, including profitability requirements. 

Additionally, given that U.S. markets offer relatively higher valuations for certain sectors, it remains to be seen whether the new rules will drive more mainland Chinese companies to list in Hong Kong, Au said.

He also mentioned that among Chinese companies listing on Nasdaq in the first half of the year, about 80 percent raised less than US$25 million. 

While smaller Chinese firms might consider listing on Hong Kong's GEM board, its current low liquidity and lack of institutional investors mean that it may not be a fully viable alternative, Au said