HONG KONG – Acknowledged to be among the most vibrant capital markets globally as well as the third largest stock exchange in Asia with an average daily turnover of HK$150 billion (RM80 billion), the Hong Kong stock exchange (HKEX) has both similarities with and differences to Bursa Malaysia, with the similarities giving a sense of familiarity to the Malaysian companies seeking to list there.
While the number of listings of Malaysian companies in Hong Kong is insignificant at the moment, Shenwan Hongyuan Capital (HK) Ltd managing director and head of corporate finance Willis Ting said there is interest from Malaysian firms to leverage on the Hong Kong market.
He believes more companies will list in Hong Kong as its market sentiment continues to be good, with the ability to provide liquidity.
PRG Holdings Bhd’s 75%-owned manufacturing arm Furniweb Holdings Ltd made its debut on HKEX in October at HK$0.64, up 28% from its initial public offering (IPO) price of HK$0.50.
Pentamaster Corp Bhd is looking to list its automated solutions business Pentamaster International Ltd on the main board of HKEX.
Other Malaysian firms that are listed in Hong Kong include Parkson Retail Group Ltd, Genting Hong Kong Ltd, Media Chinese International Ltd and Guoco Group Ltd.
Speaking to SunBiz in Hong Kong recently, Shenwan’s director of corporate finance Sunny Chan said besides the liquidity of the Hong Kong capital market, the similarities in the regulatory requirements and the listing structure of the exchange with Bursa Malaysia make it a feasible overseas IPO destination for Malaysian firms.
For Ting, the attractiveness of the HKEX is its currency value compared with the US.
“For a lot of worldwide institutional investors, it is easier to manage their money here,” he said.
The trading window for HKEX is between 9.30am and 4pm, whereas Bursa Malaysia trades between 9am and 5pm.
According to Chan, it is common to see IPOs in Hong Kong being oversubscribed by over a 100 times, which is quite rare in Malaysia.
In terms of structure, the Hong Kong stock exchange has two boards – the Main Board and the secondary board known as the Growth Enterprise Market (GEM), whereas Bursa Malaysia has three – the Main Market, the ACE Market and the recently launched Leading Entrepreneur Accelerator Platform (LEAP).
Worth noting is that HKEX has proposed a new board, which will be quite similar to LEAP, to fill the financing gap for growing enterprises such as startups.
HKEX’s GEM is the counterpart of Bursa Malaysia’s ACE Market. Both are sponsor-driven and cater to growing firms across various industries. GEM carries inherent risk due to the profile of its listees, which are usually in the early growth stage.
GEM stocks are known for volatility in price movements. Prices of all GEM stocks skyrocketed by 743% in 2015 before plunging by 90% at one point in the same year. As at the first half of 2016, the price gain for the stocks was 454%. GEM has a turnover of HK$498 million.
This volatility has prompted Hong Kong’s regulators to come up with a proposal for listing reforms, which include removing the bourse’s status as a “stepping stone” to the Main Market, increasing its market capitalisation and introducing a mandatory public offering mechanism of at least 10% of the total paid-up capital.