Hong Kong should refine pathways for pre-profit, intellectual property-rich companies and the weighted voting rights regime to attract innovation-led issuers, said the Financial Services Development Council.
Although some innovative firms have strong IP and research and development capabilities, many still seek an exit or initial public offering because they are not yet profitable, said Rocky Tung Yat-ngok director and head of policy research of the FSDC.
In the current market environment, many of these unlisted firms are considering the US market — which has lower listing thresholds, he said, adding that the SAR should actively consider attracting such companies.
These ventures, grounded in advanced engineering or scientific discovery, are often misperceived as higher risk, the FSDC said in a report. In addition, under the current Hong Kong listing practice, digital asset holdings are generally treated as intangible assets and are not recognised as a distinct, regulator-endorsed reserve class, the report said.
Tung added that most of Hong Kong’s daily turnover is concentrated in 50 to 150 stocks, while the remaining two-plus thousand stocks see very thin trading, especially small and mid-cap names that do not benefit from southbound flows from the Stock Connect.
He recommended introducing a market-maker system for these stocks, and expressed hope that the Stock Connect scheme could be expanded to allow mainland and international capital to invest more easily in both the mainland and Hong Kong markets.
