Listing PRC Companies in Hong Kong

Background

Hong Kong is an attractive place for PRC and international companies to do fund raising. The Hong Kong Stock Exchange currently ranks 8th in the world by market capitalization while Shanghai, Singapore and Shenzhen are in 14th, 21st and 24th position respectively. In 2004, Hong Kong ranked 2nd in the world after New York, in terms of equity funds raised, with Shanghai, Shenzhen and Singapore ranking 13th, 20th and 28th respectively.

Mainland enterprises listed in Hong Kong accounted for 28.13% of the total market capitalization of the Hong Kong market at the end of 2004. The ten largest IPOs in Hong Kong since 1993 have all been by mainland enterprises. In 2003, 8 of 10 of the largest IPOs were mainland enterprises.

Basic Listing Requirements for PRC companies

The following are the major basic requirements for listing a PRC company in Hong Kong :-

To list in Hong Kong, an applicant can, based on its own circumstances, apply to list on the Main Board or the Growth Enterprise Market ("GEM") pursuant to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited or the Rules Governing the Listing of Securities on the Growth Enterprise Market of the Stock Exchange of Hong Kong Limited ("the Listing Rules"). Both the issuer and its business must, in the opinion of the Stock Exchange, be suitable for listing and its accounts must be prepared in accordance with either Hong Kong Financial Reporting Standards or International Financial Reporting Standards.

A new applicant for the Main Board must have a trading record of not less than three financial years under substantially the same management and ownership and meet one of the following three financial criteria :-

1. Profits Test

2. Market Cap/ Revenue Test

3. Market Cap/ Revenue/ Cashflow Test

Profits Attributable to Shareholders

At least HK$50 million in the last three financial years (with profits of at least HK$20 million recorded in the most recent year, and aggregate profits of at least HK$30 million recorded in the two years before that)

Market Cap

At least HK$200 million at the time of listing

At least HK$4 billion at the time of listing

At least HK$2 billion at the time of listing

Revenue

At least HK$500 million for the most recent audited financial year

At least HK$500 million for the most recent audited financial year

Cashflow

At least 1,000 shareholders at the time of listing

Positive cashflow from operating activities of at...