KPMG: Hong Kong Stock Exchange Optimizes IPO Pricing Suggestions to Provide Greater Flexibility for Mainland A-share Issuers Listing in Hong Kong

Yesterday, the Hong Kong Stock Exchange (00388) issued a consultation paper on optimizing IPO and corporate governance rules. KPMG China Capital Market and Practice Technical Partner Liu Guoxian said that as a super connector between mainland China and the rest of the world, the Hong Kong capital market is highly attractive to A-share companies looking to expand their international investor base. The HKEX's optimization suggestions for the public market aim to provide A-share issuers listing in Hong Kong with greater flexibility and ensure that their stocks have sufficient liquidity for trading in the Hong Kong market. Building on its globally renowned IPO market foundation, the HKEX has put forward a series of proposals to optimize IPO pricing. The suggestions for the IPO pricing system aim to encourage more investors to participate in the book-building process, reduce post-IPO price fluctuations, and increase the willingness of large investors to participate in the Hong Kong IPO market to improve the issuance of new shares for all companies coming to Hong Kong. Liu Guoxian stated that the HKEX announced two capital market reforms yesterday to further enhance Hong Kong's position as a top global listing and fundraising market. The optimization of IPO pricing and public market requirements aims to enhance the competitiveness of the Hong Kong securities market, while the optimization of corporate governance rules will strengthen the level of corporate governance among Hong Kong-listed companies. These measures will help promote the resilience and sustainable growth of the Hong Kong capital market, solidifying Hong Kong's leading position as an international financial center. The revised corporate governance rules will take effect from July 1, 2025, striking a balance between maintaining market quality, enhancing investor protection, and maintaining market efficiency. The revisions include setting limits on over-tenured and over-appointed independent non-executive directors, with transition periods of three years and six years respectively, providing listed companies with sufficient flexibility to gradually meet compliance standards. Overall, these improvements align with investors' higher expectations for corporate governance, ensuring that Hong Kong can maintain its international competitiveness and continue to support the vigorous development of its capital market.