HKEx Role in Capital Formation

Hong Kong Exchanges and Clearing Limited (HKEx) plays a central role in the global capital market by  providing an efficient, sound and transparent regulatory framework to facilitate the raising of funds and trading  of securities.The regulatory standards of Hong Kong are highly comparable with the standards of other major financial markets.

Hong Kong’s world-class market infrastructure for trading, clearing and settlement of securities, the provision of fund raising opportunities to companies and its market liquidity have attracted both institutional and retail investors to participate in the market. Please refer to the attachment,“Highlights of HKEx Securities Market” for more information.

Main Board and GEM

The Main Board and the Growth Enterprise Market (GEM) are two separate markets that comprise HKEx’s Stock Exchange. The Main Board facilitates capital raising by established companies with track records of operating profits. GEM facilitates capital raising by emerging enterprises.

Basic Listing Requirements

(a) Main Board

• Trading record of not less than 3 consecutive years 
• Profit of not less than HK$20M (most recent year) and HK$30M (aggregate of the 2 preceding years) 
• Expected market capitalisation of not less than HK$100M 
• At least 25% of the securities must at all times be held by the public (Exception: 10% public float for companies with market capitalisation of over HK$4 billion)

(N.B. Please refer to the Main Board Listing Rules  for details.)

(b) GEM 

• Active business pursuits for the 2 years before  listing application 
• A focused line of business 
• Same management and ownership during the 2  years before listing application 
• A sponsor, in an advisory capacity, must be engaged for 2 full financial years after listing
• Minimum public float is 25% (minimum HK$30M,  for companies of market capitalisation not exceeding HK$4 billion), or 20% (minimum HK$1 billion, for companies of market capitalisation exceeding $4 billion)

(N.B. Please refer to the GEM Listing Rules for details.)

Listing Procedures Highlights

Major milestones in an IPO listing process include: 

• Appointing a sponsor for the preparation of the listing of the issuer 
• Submission of the Listing Application Form by the sponsor 
• Submission of all relevant supporting documents
• Vetting of the issuer’s listing application by the Listing Unit
• Obtaining approval from the Listing Committee 
• Offering of issuer’s securities to institutional and retail investors – sponsors, underwriters and intermediaries are involved 
• First day of dealings in issuer’s shares is scheduled to be no earlier than the day immediately following the day of despatch of share certificates of the issuer

Inquiries on Issuer Services

For information regarding issuer services, including, listing related issues of potential issuers, please contact Issuer Services at:

Tel: (852) 2840 3757
Fax: (852) 2295 0980
E-mail: issuerservices@hkex.com.hk

Securities Market Products

HKEx operates a securities market where investors can buy and sell a wide range of products including: 

• Equities 
• Corporate Bonds 
• Convertible Bonds 
• Government and Supranational Bonds and Notes 
• Corporate Warrants 
• Derivative Warrants 
• Unit Trusts and Mutual Funds 
• Exchange Traded Funds 
• Equity Linked Instruments

Market making systems are available for some of the products to enhance liquidity.

Issuers & Market Information Issuers & Market Information  Information on listed issuers, including companies, prospectuses, announcements and annual reports are available from:

• The HKEx website (www.hkex.com.hk) 
• Listed companies’ websites (if available) 
• Financial portals and websites operated by external  parties

Investors can efficiently and easily obtain information on listed products by clicking onto the “Investment Service Centre” of the HKEx website or other financial portals and websites operated by external parties.The Investment Service Centre makes available to the public historical and delayed stock prices in chart or data form.

A complete list of Exchange Participants of HKEx (brokers) is also available on the HKEx website. All Exchange Participants and their account executives have to be licensed by the Securities and Futures Commission (SFC). A list of these registered persons and firms are available on the SFC website (www.hksfc.org).

Securities Accounts

There are two types of investor accounts for securities trading:

Cash Account

Investors have to pay the full purchase price of a stock purchase order within the time stipulated in the client agreement.

Margin Account

Investors have to pay only a fraction of the total purchase price of a stock purchase order at a certain stipulated time under the client agreement. Such investors shall obtain financing from a broker through using the shares as collateral security.

An additional risk disclosure statement has to be acknowledged by investors who trade in GEM stocks.

Securities Market Trading System

HKEx operates an efficient, transparent and orderly securities market in Hong Kong through its Third Generation Automatic Order Matching and Execution System (AMS/3).The central order book is transparent to investors as the market depth is revealed by showing the 5 best bid and ask prices.

Orders from investors are automatically matched and executed in price and time priority on AMS/3 and trades are transferred to the Hong Kong Securities and Clearing Company (HKSCC) for automatic settlement among Exchange Participants.

Distribution of Trading Activities

There is a good mix of market participants with approximately one-third each of local retail, local institutional and overseas institutional investors.

Major Transaction Costs for Securities Trading

Major securities transaction costs include:

• Brokerage Commission 
• Transaction Levy 
• Investor Compensation Levy
• Trading Tariff 
• Stamp Duty (if applicable)

Trades Settlement and Short Selling

Trades Settlement and Short Selling HKSCC operates an automatic Central Clearing and Settlement System to settle trades concluded on AMS/3 two days after trade execution. Investors may sell their securities immediately after purchase; short selling is allowed under specific conditions.

Custodian Services

Most Exchange Participants offer custodian services for shares traded on the Main Board and GEM to their clients. Custodian services are also available from custodian banks and Investor Participant Accounts offered by HKSCC. Scrip may be collected from Exchange Participants after purchase except for scripless issues.

Market Indices

Various indices measure the performance of the Hong Kong securities market, such as the Hang Seng Index, the Hang Seng China Enterprises Index, the S&P/HKEx Large Cap Index, the S&P/HKEx GEM Index and the MSCI family of indices.

Inquiries on Exchange Participants and Products

For information regarding Exchange Participants and securities market products, please contact Cash Market Development and Operations at:

Tel: (852) 2211 6119
Fax: (852) 2526 6315
E-mail: partmktg@hkex.com.hk

Highlights of HKEx Securities Market
(as of July 2003)

No. of listed companies:
  Over 1,000 (from over 15 countries and regions)
Market capitalisation:
  Over HK$3.5 trillion (ranked second in Asia)
No. of H Shares & Red Chips:
  Over 150
Funds raised for H Shares & Red Chips (since July 1993):
  Over HK$700 billion
Brokers from:
  Over 18 countries and regions

Hong Kong Exchanges and Clearing Limited
12/F, One International Finance Centre,
1 Harbour View Street, Central, Hong Kong
Tel: (852) 2522 1122 Fax: (852) 2295 3106
Website: www.hkex.com.hk Email: info@hkex.com.hk

You can download the booklet on Hong Kong Exchanges and Clearing Limited Website:
http://www.hkex.com.hk/invedu/booklet/leaflet.pdf (PDF format, 335KB)

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