Hong Kong stock exchange is breaking away from the tradition of requiring companies to disclose China-related business risks in their listing applications. This move, which becomes effective immediately, aligns the city with Beijing’s disclosure changes.
Revising the Listing Rules
In a latest revision, the stock exchange decided to remove an entire section that once focused on China’s policy risks and business environment. The details were disclosed in a consultation conclusion paper published on July 21.
Embracing Change in the Wake of Beijing’s Moves
Following China’s securities watchdog’s up to date offshore list regulations in February, Hong Kong accompanied in shape with its very own session on proposed modifications per week later. As a result, Hong Kong Exchanges and Clearing Ltd made adjustments to comply with the “recent changes in Mainland China regulatory framework.
A Level Playing Field
A major shift lies in the fact that the new requirements align for all overseas-incorporated companies, eliminating the distinction previously made for People’s Republic of China-incorporated issuers.
Despite this overhaul, the exchange remains steadfast in its commitment to maintain the same level of scrutiny required by the listing rules for China-incorporated issuers.
Regulatory Caution from China Securities Regulatory Commission
On July 20, the China Securities Regulatory Commission issued a cautionary directive to local lawyers, urging them now no longer to encompass bad descriptions of China’s rules or its enterprise and criminal surroundings in list prospectuses. Non-compliance could lead to regulatory complications for IPOs.
Implications for Chinese Companies and Global Investors
Chinese companies often choose to go public in either Hong Kong or the United States.As a result, international traders pay near interest to the disclosures made in theirIPO prospectuses to accurately assess the associated risks and prospects.
A Nudge from the U.S. Securities and Exchange Commission
Adding to the scrutiny, the Insecurities and Exchange Commission these days directed Chinese corporations indexed on U.S. stock exchanges to provide more detailed information about the Chinese government’s role in their operations and the impact of the 2021 law banning imports from China’s Uyghur region.
From Old Rules to New
Previously, Hong Kong’s listing rules mandated issuers to offer a summary of risks related to China’s laws and Regulations, political structure, financial environment, forex controls, trade charge dangers, and different precise dangers related to doing commercial enterprise in China.
However, these specific requirements will no longer be compulsory for listing disclosures under the amended rules.
Offshore Listing Proposals Galore
Since the implementation of the new offshore listing regime in China on March 31, most Chinese companies have filed their offshore listing proposals with the Hong Kong exchange. However, only a select few have received Beijing’s approval to raise funds.