Tighter governance on China listings

Hong Kong, 25 August 2003

Chiefs at the exchange have been publicly expressing concern about the impact on Hong Kong of recent high profile incidents over the last couple of years, including investigations into the Bank of China (Hong Kong) and Euro-Asia Agriculture (Holdings) Ltd.

Hong Kong Exchanges and Clearing Ltd has told Beijing of its proposals in advance of the meetings.

They include requiring companies to appoint at least three independent directors. Sponsors of those seeking a listing will be required top apply much more stringent criteria in selecting and bringing forward suitable candidates and undertaking due diligence.

Under consideration is a relaxation of some rules, including a waiver of the trading record requirement for those applicants with a market capitalisation of at least four billion Hong Kong dollars (E 467.8m), and revenue of at least 500 million Hong Kong dollars (E 58 million). In return HK EX will insist such applicants have at least 1,000 shareholders.

The Hong Kong Exchange is anxious to dispel a view prevalent in some circles that it has compromised the quality of listings by trying to achieve critical mass. In an interview chief executive Paul Chow said that “heavier penalties for rule breakers would improve the disclosure of corporate information and offer investors better protection."