Hong Kong is pressing ahead with a second wave of stock exchange reforms aimed at making the city a more competitive destination for innovative and technology companies, but legal experts say significant barriers remain for firms considering a listing there.
Fang Liu, a partner at international law firm Clifford Chance, told the South China Morning Post that many of his technology company clients are interested in listing in Hong Kong but find the current requirements overly burdensome. Liu's firm has assisted more than a dozen innovative companies in raising capital under Hong Kong's updated listing framework since 2018.
Background on the 2018 reforms
That year, Hong Kong Exchanges and Clearing - known as HKEX - introduced a package of changes that opened the door to pre-revenue biotech companies and firms with weighted voting rights, or WVR structures. Under WVR arrangements, one class of shareholders holds greater voting power than another, a structure commonly favored by technology founders who want to retain control of their companies after going public.
The 2018 reforms were widely seen as a significant step toward modernizing Hong Kong's exchange and positioning it alongside rivals such as the Nasdaq in the United States and the London Stock Exchange, both of which had already adapted their rules to accommodate high-growth, founder-led businesses.
Pressure to go further
Despite the progress made under the first round of changes, legal advisers and market participants argue that a second round of reforms - sometimes referred to as listing reform 2.0 - is necessary if Hong Kong wants to remain competitive. The concern is that companies with unconventional structures or those that have not yet reached revenue milestones may still find the city's requirements difficult to navigate compared to other global financial centers.
The push for further reform comes at a time when Hong Kong is working to reassert itself as a premier hub for capital markets in Asia. The exchange has faced intensifying competition not only from Western markets but also from regional rivals including Singapore, which has also moved to attract technology and special purpose acquisition company listings in recent years.
What reform 2.0 could mean
Proposals under consideration as part of the next phase of reforms are expected to address issues including the eligibility criteria for early-stage companies and the flexibility afforded to firms with complex ownership structures. Supporters of the changes argue that streamlining the process would allow Hong Kong to capture a greater share of listings from the region's fast-growing technology sector.
Critics, however, caution that loosening requirements too aggressively could expose investors to greater risk and potentially damage the exchange's reputation for regulatory rigor - a quality that has historically been one of its key selling points to international capital.
HKEX has not publicly outlined a final timeline for implementing additional reforms, and consultations with market participants are expected to continue.
