Articles: Listing rules

Breaking: HK Government withholds Task Force report, citing threat to financial markets stability
We asked for the report. They refused. Now we're really wondering what's in it. (29-Jan-2024)
Censure of C-Link Squared (1463) and 2 founder-EDs
SEHK, 5-Oct-2023
Within days of the IPO, an amount equal to 50.8% of the net proceeds was paid out as non-refundable advance "service fees". We note that the market cap at the IPO price was HK$504m, just above the minimum $500m. We've seen that pattern several times and in some cases the fees may be a way to indirectly rebate the IPO proceeds to get listings done at an artificially high price. In this case, though, the stock took off and is now up over 6x since IPO, in a bubble in our view. Both the co-founders have resigned and sold their shares.
Sanction of Lisi (0526) but not any of its directors
SEHK, 19-Jul-2023
Somehow the company managed to repeatedly break the listing rules all by itself. The Exchange sent 3 earlier private warning letters from 2014-2016, so we wonder how often they keep the dirt private rather than make the market look even worse (which it is). The Exchange is for-profit, after all.
CIL Holdings Ltd (ex-479) v SEHK
HK Court of First Instance, 19-Jun-2023
Justice Coleman opens with a cricket metaphor. We would add that the Applicant is out for a duck. The application for judicial review of the Exchange's delisting decision is dismissed. The company did not show up, and the grounds are meritless.
Sanctions against 2 more executive directors of Inno-Tech (ex-8202)
SEHK, 12-Jan-2023
For failure to co-operate with an investigation by the for-profit, toothless regulator. Increasingly, that seems to be the most popular response amongst directors of failed companies as they have no realistic prospect of returning to the HK market. By the way, Webb-site warned investors about this stock 11 years ago.
Censure of Brightoil Petroleum (ex-0933) and 4 directors
SEHK, 3-Feb-2021
They failed to announce SEHK Listing Committee's decision to delist the company - something that SEHK could have announced anyway. Why doesn't SEHK announce its own decisions and appeals against them, to keep the market informed?
The Main Board profit requirement - for whom?
Webb-site responds to the HKEX proposal which further raises the barriers to entry for smaller companies on its monopoly stockmarket and reduces investor choice. Help us out and add your voice! (14-Jan-2021)
ICAC, SFC investigate alleged corruption of listing applications at HKEX (0388)ICAC announcement
SFC, 26-Jun-2019
Webb-site first heard the allegations on 30-May and they were reported in media since then, so evidence may have been lost before the SFC and ICAC launched raids on 2 sponsors, 2 listed companies and a printing firm from 23-Jun onwards. A former Joint Head of the IPO Vetting Team and 2 of his associates have been arrested by the ICAC. You may wonder why a for-profit listed company is in the "business" of regulation. That's because the HK Government rejected the advice of its Expert Group to remove the conflict in 2003. The HK listing process also involves a high degree of subjectivity on "suitability". Any such process invites corruption.
Chung Keng v Pearl Oriental Oil (0632)
HK Court of First Instance, 2-May-2019
"If it is possible for a company to obtain from the Exchange approval of the appointment of Ms Lyn it goes some way to explain why the Companies Court rather too frequently encounters examples of inadequate corporate governance by Hong Kong listed companies. I will be sending a copy of this decision to HKEx and I would hope that it will look into this matter." - Justice Jonathan Harris. Our comment: the judge misses the point. INEDs should be elected by independent shareholders. The INED system is a joke, so long as HKEX allows controlling shareholders to vote.
The national investment fund that isn't
A Friday night announcement illustrates all that is wrong with HK's Listing Rules for closed-end funds. (23-Mar-2019)
Hopewell and the lemon discount
What does the ability to take a company private for 57 cents on the dollar say about the future of HK's public market? Failure to reform HK's laws and regulations to improve the corporate governance framwork will see the market shrink over time as good companies stay away and controllers take existing companies private. (22-Mar-2019)
Inside the Kingdee bubble
It appears to be a Shenzhen success story, conquering the World with the "Chinese management model", but we burn through the techno-fog of the disclosures and dig deep inside the accounts. You won't like what you see. (18-Mar-2019)
Mysterious 8,500% stock gain attracts big funds (and big questions)
Bloomberg, 22-Feb-2019
Comment: this is a closed-end investment fund trading at 93 times its net asset value, rather than the normal discount that such funds attract. MSCI and HSI should know better than to include such funds in their indices, as they are not regular companies and are prohibited from participating in business management. They are also exempt from the public float requirements, which is probably why the SFC has not issued concentration warnings on such stocks, but it should do so anyway.
How activist Webb earned 20% a year investing in Hong Kong stocks (video)
Bloomberg, 4-Jan-2019
The 20%-a-year stock picker who wishes his edge would disappear
Bloomberg, 3-Jan-2019
HK activist's jab at bourse starts US$228m fall
Bloomberg, 19-Nov-2018
You have been warned…
41 endangered stocks
If HKEX proceeds with an ill-conceived Listing Rule change, companies with disclaimed audit reports for 2019 will be suspended and likely delisted, victimising minority shareholders. We now list those with disclaimed audits up to 30-Jun-2018 which would be affected if the rule applied today. Make your submission to stop this nonsense! (17-Nov-2018)
HKEX: shoot patients to prevent illness
HKEX's proposal to suspend and then delist companies with disclaimed audits works against investor interests in several ways while doing nothing to address the root causes of corporate illness. In a partial revival of the 2002 Penny Stocks proposals, the self-interest of HKEX in ditching unprofitable business cannot be ignored. We again call for the regulatory function to be transferred to the SFC and HKEX's monopoly to be abolished. Only when there is competition can they pick and choose their customers. HKEX fails to name the 43 firms that would have been suspended on their 2017 audits. Answers by Tuesday morning, please! (30-Sep-2018)
Who showed up? A simple change to the Listing Rules
Announcements of AGM/EGM outcomes should include directors' attendance. We shouldn't have to wait for the next annual report to find out who showed up. (9-Sep-2018)
Webb on Reuters TV re second-class shares and Communist Party strategy
Reuters, 10-Jan-2018
Webb on "The Pulse" re the Enigma Network (video)
RTHK, 16-Dec-2017
Webb: HKEX reforms won't help independent directors
RTHK, 10-Nov-2017
If only INEDs were independent
David Webb will be speaking at a conference in HK today. These are his slides, on the most fundamental issue in HK corporate governance. (10-Nov-2017)
Statement on the conclusions on HK Listing Regulation
HK loses on two levels from today's climbdown by the SFC. (15-Sep-2017)
Concentration warning in ITP Holdings (8446)
SFC, 14-Sep-2017
Despite having a public offer tranche, by 2.5 months after listing, the top 16 holders had 94.76% of the company. The stock is now over 20x its IPO price. This nicely demonstrates that requiring a public offer (which HKEX has proposed) won't prevent bubbles.
One Board, One Regulator
We respond to HKEX's 2nd attempt to introduce 2nd-class shares via a "New Board", rather than cleaning up its existing boards and transferring listing regulation to the statutory regulator which oversees takeovers, the SFC. Coupled with recent moves to embed the Communist Party in the constitutions of state-controlled enterprises, HK and China risk a toxic combination of no votes for government and no votes for capital, leading to an emerging tycoon-Communist Party oligarchy. We propose a better approach. (7-Aug-2017)
Webb on "Newswrap" re HKEX third board and GEM
RTHK, 16-Jun-2017
Shareholder activist David Webb says the Hong Kong Stock Exchange, which has proposed setting up a new board to open ways for more mainland tech companies to list in the city, is going in completely the wrong direction. He said Hong Kong should have a single board, rather than confusing the market with more boards. He told Jim Gould that a simpler structure should also have better disclosure and governance requirements.
My Heart Bodibra listing goes tits-up
Company announcement, 3-Feb-2017
HKEX/SFC are apparently requiring a different distribution of the placing - but that won't turn it into a widely-held stock, so what is the point? Just disclose the distribution, or even the identity of the placees, and let the buyer beware (caveat emptor). The company will keep the market abreast of the situation.
CIFG (1226) coughs up details of investments at 30-Sep-2016
Company announcement, 23-Jan-2017
This follows a complaint to HKEX by Webb-site on 26-Dec-2016 that CIFG had failed to disclose details of "significant investments" as required by paragraph 32(4) of Appendix 16 of the Listing Rules. We calculate that the holdings included 3.32% of WLS (8021), 3.90% of KPM (8027), 1.30% of GCPS (8193), 4.49% of AMCO (0630) and 4.86% of RCG (0802).
Listing Decision LD102-2016 decoded
SEHK, 9-Dec-2016
By looking at the details of the "Last Rights Issue" we can infer that "Company A" is Eminence Enterprise Ltd (0616), which launched a 20:1 rights issue on 6-Aug-2015. A low 20% turnout of "independent" shares approved the issue on 7-Oct-2015 and the public shares were 52% undersubscribed when it closed on 5-Nov-2015. In the Decision, the Exchange refused to grant listing approval for another 20:1 issue at a 90% discount to market. We can tell you that on 13-Oct-2016, the company instead announced a 3:1 rights issue at a 33% discount. Update: this was vetoed by a 60:40 majority at the EGM on 15-Dec-2016. (8086) buys Full Profit Property Services Co Ltd from Finsoft (8018) for HK$20mFinsoft announcement
Company announcement, 1-Dec-2016
Finsoft bought it for HK$6m on 30-Dec-2015 from Jia Meng (8101). Disclosure on "discloseable transactions" in HK is so minimal that it is impossible to tell whether the surge in profits represents 1-time items (such as gains on listed securities) or not.
Hiding behind the cornerstones
Webb-site reveals that investors who took 31% of a bank IPO had secretly laid off their risk by issuing derivatives to a mainland property developer from the same city, via two HK-listed companies which incidentally are bubble stocks. When we complained, HKEX did not require disclosure of the bank’s identity, thereby preserving the secrecy behind the cornerstone investors which facilitate HKEX’s IPO business. Once again, the regulatory conflict of interest is exposed. (3-Oct-2016)
China Innovative Finance (0412) bubble
Hao Tian Development (0474) has confirmed our view by dumping 9.06% of CIFG at a 61.9% discount, still well above the net tangible asset value of $0.099. CIFG should trade below NTAV due to its appalling governance and membership of what we call the "Chung Nam Network". The purported profits of its leasing division are largely illusory and depend heavily on 1 customer in which CIFG has invested. HTD has also been allowed by HKEX to skirt the Listing Rules on corporate transactions. (26-Sep-2016)
Activist Webb pushes for even more radical listing reforms
HK Standard, 7-Sep-2016
By "radical" they mean "rational".
Submission by Anthony Neoh, SC on listing regulation, 20-Aug-2016
Mr Neoh, who was Executive Chairman of the SFC from 1995 to 1998, has kindly shared his submission with Webb-site. (6-Sep-2016)
Submission to SFC-HKEX consultation on listing regulation
These are our views on SFC-HKEX proposals to reform regulation of listings and listed companies. If you are an investor who cares about the future of HK's markets, please submit your support. The proposals are better than the status quo, but a political compromise on the 2003 Expert Group recommendation to transfer regulation to the SFC, and that should be Plan B. (6-Sep-2016)
Webb on CNBC re listing regulatory reform
CNBC, 16-Aug-2016
SEHK may delist China Oriental (0581) in 6 months
SEHK, 27-Jul-2016
This threat can only hurt the public shareholders who own 7.9% and have had their investment frozen since 29-Apr-2014 on the grounds that the float is too small. At the suspended price, the public float is worth HK$269m, larger than in many other listed companies. Ironically, SEHK blames the company for "depriving shareholders of trading their shares". Look in the mirror, SEHK, it's your rule. Scrap it.
China Fortune (8116): resignation of Co-Chairman
Company announcement, 7-Jul-2016
This follows a complaint by Webb-site that, under the Articles of Association, the board can only elect one Chairman. It has had two Co-Chairmen since 5-Nov-2012. The Listing Rules also contemplate special duties for the Chairman which would not make sense if there were more than one.
SFC obtains disqualification orders against former senior executives of China Best (0370)
SFC, 31-May-2016
This is a good example of a case in which a connected person of the company (Mr Wang Jian Hua) was hiding behind a BVI company and using a nominee owner, which China Best claimed was an "independent third party". The Stock Exchange Listing Rules still do not require the owners of such shells to be identified in announcements. Eventually the transaction was abandoned.
Presentation on HK securities market reform
These are the slides from a presentation by David Webb to accountants hosted by legislator Kenneth Leung this evening. (16-May-2016)
HK Education (1082): breach of Listing RulesCircular
Company announcement, 12-May-2016
The company declared itself to have a "principal business" of securities investment, but the Stock Exchange ruled that the subscription of shares in Convoy (1019) and IE China (8081) were notifiable "transactions" under Chapter 14 of the Listing Rules. Notably, the company says that any future purchase or disposal of securities should be a "transaction" under Chapter 14. Comment: the Exchange has been inconsistent in applying Chapter 14 to other companies involved in similar shenanigans.
Dragonite (0329) pools shares of HEC Capital Ltd with others
Company announcement, 11-May-2016
This announcement of a transaction 8 months earlier follows a complaint by Webb-site regarding the opacity of the 2015 results. Dragonite is a member of what we call the "Chung Nam Network". Dragonite fails to disclose the governance arrangements of Joint Global Ltd such as its board composition, or how, with an 8.89% stake, Dragonite will have any influence over its decisions. In our view, this should have been a disclosable transaction under Chapter 14 of the Listing Rules as it represents 15.1% of total assets at 31-Dec-2014.
HK-listed firms may have to return excess cash to investors
IR Magazine, 28-Apr-2016
SEHK tackles bonus issues, misses the obvious
The Stock Exchange, in a guidance letter tonight, says it will reject listing of bonus issues of 200% or more, because they tie up too much of the float between the ex-date and distribution date. They propose stock splits as an alternative, but they omit the faster and better way to reduce board lot value, which HKEx itself used in 2008. (27-Apr-2016)
HKSAR v Theodore Cheng Chee Tock
HK Court of Final Appeal, 21-Mar-2016
The late Mr Cheng wins his final appeal. Our take: the Government, represented by Nicholas Cooney SC, shot itself in the foot by disavowing reliance on Listing Rule 1.01, which defines a connected person to include companies such as SSI which are 30% or more controlled by a director of the listed issuer. This really is Listing Rules 101.
Preventing cash shells
Webb-site proposes a new Listing Rule to prevent cash shells. The Cash Shell Test introduces equity discipline for existing companies and provides clarity for those proposing transactions and fund-raising. It should be welcomed by investors, regulators, issuers and their advisers. HKEx needs to build a proper sanitation system for this village rather than dig a new cesspit. (3-Mar-2016)
Imagi (0585) sets up money-lending JV
Company announcement, 26-Feb-2016
The JV partner is a BVI company, the owner of which is not disclosed. Imagi is a cash shell. The JV will not be a subsidiary, so it will not be subject to the Listing Rules on connected transactions, so it can lend money to connected persons of Imagi. Imagi is part of what we call the "Chung Nam Network".
Concentration warning in Jujiang Construction (1459)
SFC, 4-Feb-2016
Comment: unlike the GEM, the Main Board Listing Rules do not require any statement of the distribution of placing shares at the time of listing. 90% of the issue was placed, probably in concentrated hands, but no disclosure was required before trading began on 16-Jan. The main board rules should adopt the GEM requirement, disclosing how many shares went to the largest, top 5, top 10 and so on.
StanChart (2888): holders of unsubscribed rights to receive payment
Company announcement, 11-Dec-2015
The shares were placed out at 505p, a premium to the 465p rights issue price, so those in HK who did not take up their rights will get 40p for each rights share, minus expenses, converted to HKD. Unlike HK, the UK Listing Rules require issuers to protect inactive shareholders by doing this. For all other HK rights issues, this never happens, thereby stealing from sleeping holders. When will HK upgrade shareholder protection?
China Goldjoy (1282) adopts "securities investment" as a principal business activity
Company announcement, 11-Nov-2015
This will allow it to sink shareholders' funds into stocks, claiming this is "ordinary business" and exempt from the disclosure and approval requirements of the Listing Rules.
Focus Media Network (8112): SEHK rejects listing application on cash shell ground
Company announcement, 19-Oct-2015
HKEx drops second-class shares proposal
SEHK, 5-Oct-2015
HKEx has finally thrown in the towel on its attempts to list second-class shares. Corporate governance was already bad enough without making it even easier to abuse minority shareholders. Charles Li’s campaign to do this exposed the blatant conflict of interests in the Exchange being a for-profit regulator. This conflict should now be addressed by transplanting the listing function to the SFC, the statutory regulator. The Listing Committee, dominated by issuer interests, needs radical reform too.
Bubbles and troubles in Hong Kong
Pour yourself a coffee and digest this long article as we investigate several ongoing abusive "open offers" and placings as well as show you who's been making out in multi-billion-dollar bubbles. We call on regulators and rule-makers to take action. (24-Sep-2015)
RCG (0802) restates interim results to include huge investment gain
Company announcement, 14-Sep-2015
But if fails to disclose any details of significant investments as required by paragraph 32(4) of Appendix 16 of the Listing Rules.
Sunrise (China) commences "investment in securities" business activity
Company announcement, 14-Aug-2015
This will allow it to sink shareholders' funds into stocks, claiming this is "ordinary business" and exempt from the disclosure and approval requirements of the Listing Rules.
HK regulator opposes proposal to allow dual-class shares
Bloomberg, 25-Jun-2015
SFC statement on SEHK's draft proposal on weighted voting rights
SFC, 25-Jun-2015
Hurray! This should kill it, as all changes to Listing Rules must be approved by the SFC. The SFC board "unanimously concluded that it does not support the draft proposal for primary listings with WVR structures". Now Government should recognise the huge conflict of interest in HKEx being a for-profit rule-maker and regulator. The Listing Division should be transferred to the SFC and merged with its Corporate Finance Division which oversees the Takeovers Code, as a Government-appointed Expert Group recommended in 2003.
Li Ka Shing supports 1-share-1-vote
South China Morning Post, 23-Jun-2015
Now perhaps he can get that message through to his representatives on the Listing Committee.
Bonus hogwash
The Stock Exchange and SFC continue to allow companies to make false and misleading statements about "bonus" issues of shares - we take a look at the latest example. (11-Jun-2015)
Principles of Responsible Regulation
Webb-site calls on the SFC, Government and HKEx to get serious about facilitating investor stewardship. Principles of Responsible Ownership are only useful if regulators address the deficiencies in Hong Kong's governance framework for listed companies. We call on readers to make a submission and support our proposed Principles of Responsible Regulation. (26-May-2015)
SFC CEO's opening remarks at media lunch
SFC, 19-Mar-2015
Comments on what HKEx euphemistically calls "Weighted Voting Rights" or what we call "second-class shares".
Mission Capital defines "new principal line of trading business"Listing Rule 14.04(1)(g)
Company announcement, 17-Feb-2015
MC is trying to exploit a loophole in the Listing Rules to treat property transactions as part of its trading business, and therefore of a "revenue nature" and exempt from disclosure and approvals under LR 14.04(1)(g). Four minutes after this, it "voluntarily" announced the acquisition of a BVI company which owns a property, calling it a "trading asset".
Blackrock's submission to HKEx on "Weighted Voting Rights"
Company, 30-Nov-2014
"In BlackRock’s view, under no circumstances should the Exchange allow companies to use weighted voting right (WVR) structures."
Submission to HKEx on Weighted Voting Rights
Webb-site calls on HKEx to keep 1-share-1-vote and not to introduce second-class shares or allow companies to install trapdoors in their articles of association. We also launch a petition - please sign it if you agree! (21-Nov-2014)
HKEx signs MoU with CCB (0939)
Company media release, 15-Sep-2014
This MoU, for "strategic cooperation" again puts HKEx into a conflict of interest with its role as listing regulator of CCB, as it has done with China Minsheng Banking (1988). The SFC should take over as listing regulator of both banks.
Survey on Alibaba & non-standard shareholding structures
Asian Corporate Governance Association, 15-Apr-2014
Managers of over US$14tn respond that if HK allows non-standard shareholding structures then it can expect a discount of 13% to be applied to the market.
What the UK should learn from Jardines
Jardine group is downgrading its UK Listing, lowering minority rights and governance standards. The controller can vote, sealing the deal for 4 companies, but minorities of Hongkong Land could save themselves from this fate. Once downgraded, full listing cancellation requires no vote. We make recommendations to London's FCA based on HK's successful 2002 reforms to avoid a Hobson's Choice of a low buyout offer or holding delisted shares. (27-Mar-2014)
We had a dream too!
Following the hallucinations in HKEx non-elected director and CEO Charles Li Xiao Jia's blog yesterday, Webb-site had a dream last night! (26-Sep-2013)
Alibaba's spotlight on HK regulation
10 years after the Expert Group report, Alibaba's requests spotlight the unresolved conflict of interests of HKEx between profit and regulation, creating an opportunity for Government to put this back on the agenda. They should now follow through, strip HKEx of its regulatory role, create a Listings and Takeovers Authority under the SFC, and remove the special provisions of HKEx's own constitution which make it a Government-controlled company. (18-Sep-2013)
SEHK excludes gains on valuation of biological assets from trading record and profit requirements
SEHK, 7-Dec-2012
In other words, "money doesn't grow on trees". Next up: for inventory purposes, poultry-breeders will not be allowed to count their chickens until they are hatched.
HKSAR v Theodore Cheng Chee Tock & Philip Yu
HK District Court, 30-Oct-2012
"The flouting of listing rules...might well be exacerbated by a lack of tight regulation and a comprehensive mechanism to punish those who manipulate the system. It is also clear to see that quite many people in the senior management level of companies failed or were reluctant ot distinguish their own fund and the funds of a public listed company." - District Judge Stanley Chan.
Xpress excess
Here's a horror story of excessive pay at Xpress Group (0185), a company you've probably never heard of, but pay attention, because it could just as easily happen to yours, as the Listing Rules do not prevent it. In the last 15 years, the controlling family have received HK$493m in pay as directors, while the loss attributable to shareholders was $248m. (8-Oct-2012)
SEHK clings to "suitability" test
SEHK, 28-Sep-2012
"Where a company's business model is believed [by the Exchange] to be unsustainable, the Exchange will consider it unsuitable for listing". Our view: surely the desirability of an investment is for the market to decide. Given full disclosure, nobody has to buy the shares if they don't want to. SEHK can't quite drag itself away from the merit-based approach to listing approvals, despite its claim to be a disclosure-based market. Should the hundreds of listed loss-making companies be delisted just because they don't look sustainable?
HKEx consultation paper on board diversity
HKEX, 7-Sep-2012
As noted on page 16, the paper draws from the database. We are glad they found it useful. Visit the site for the latest tables on board composition of HK-listed companies.
HKEx defends 'secret' decision on China High Precision (0591)
HK Standard, 7-Aug-2012
This establishes a precedent - HKEx normally hides behind the "we never comment on individual cases" mantra. Mark Dickens, head of listing, is also quoted as saying that HKEx has spoken to the Shanghai and Shenzhen exchanges on the issue. That's interesting because the company is not listed there - so why are their views relevant to HK?
Stop the BoCom placing: get a rights issue
We call on SEHK and SSE to stop the big 3 holders from voting to approve each other's subscriptions, which would create a dangerous precedent. Thankfully BoCom has no general mandate, so they also need a special resolution to approve the placing on which they must all abstain. We urge independent shareholders to block it and call for a rights issue instead, and we suggest a way around the primitive NAV rule. (16-Mar-2012)
Glencore fails to set Hong Kong investors abuzzClick here for Webb-site CCASS Analysis
Wall Street Journal, 8-Feb-2012
Submission from Abraham Shek Lai Him (aka Abraham Razack) on why there should be no limit on INED positions
SEHK, 28-Oct-2011
Mr Shek/Razack could have mentioned that he sits on the boards of 16 HK-listed companies and the manager of 1 HK-listed REIT, as well as being a Legislator.
Current issues in HK-listed corporate governance
A presentation by David Webb at a conference in HK. (27-May-2011)
Conclusions on ex-entitlement trading and shareholder approvalOur article of 27-Jan-2011
SEHK, 20-May-2011
Hurray! SEHK has done the right thing and is banning ex-entitlement trading before shareholders have approved the entitlement. See our article of 27-Jan-2011 for more - the rights issue the paper refers to in paragraph 3 is probably Zhongtian. Now, we call on SEHK to address the other problems with rights issues and open offers explained in our article.
Response to SEHK on Corporate Governance Consultation
Webb-site publishes a detailed response to the Exchange's consultation on the corporate governance rules and code, including recommendations for fundamental reform and the results of the opinion poll on INEDs. (25-Mar-2011)
The three wise monkeys of HK boards
SEHK has proposed minor reforms to the composition of boards which completely miss the core issue - INEDs are only as independent and competent as the controlling shareholder wants them to be, as long as he or it votes on the INED elections. We call for independent directors to be independently-elected. Tell us what you think!. Read our article and then take our poll on INEDs. (15-Feb-2011)
Ex-chaos trading: Zhongtian proves point
Zhongtian (2379) yesterday demonstrated why we should not trade ex-entitlements before they are approved by shareholders: a 10:1 rights issue at a 97% discount was vetoed. HKEx launched a consultation in December, and we need your support. We also repeat two outstanding problems which HKEx has failed to address, on expropriation of passive shareholders' value, and on the discounts on open offers. (27-Jan-2011)
Zhongtian (2379) shareholders veto 10:1 rights issue at 97% discount
Company announcement, 26-Jan-2011
And here's a classic example of why HKEx should change the rules so that shares don't trade ex-entitlements until the proposal has been approved in shareholders' meeting. Zhongtian's shares went ex-rights on 19-Jan-2011.
Rusal and the retail investor
Reports say the SFC wants to prohibit the retail offering of Rusal and/or require the company to adopt a massive board lot for trading in its shares. Both measures would in fact increase the risk for retail investors, as we explain. The SFC should stick to the principles of a disclosure-based market and focus on legislative reform to increase the deterrent to prospectus fraud. (20-Dec-2009)
Tack Hsin's secret subscriber
We look at restaurant operator Tack Hsin's moves to put itself in play, and peer again into the gaping hole in Hong Kong's Listing Rules which permits the people involved in deals with listed companies to remain anonymous. Hong Kong is building its reputation as a sunny place for shady people. (7-Oct-2009)
A 100% margin loan
A HK-listed company makes a margin loan of up to 100% of the value of a portfolio held by an anonymous BVI company. Not on commercial terms, but fully compliant with HKEx's lax disclosure rules. (18-Sep-2009)
Tycoons gain in Listing Committee shake-up
Well what did you expect after the blackout saga? The changes are not subtle, and further diminish the outlook for corporate governance reforms in the Listing Rules. We take you through the changes and the likely shape of the committee until 2012 and its leadership until 2015. (8-Jun-2009)
Suitability in a disclosure-based market
SEHK has announced possible waivers of the profit criteria. We don't object, but the profit test should be scrapped. It has no place in a disclosure-based market, and is no substitute for better accounting disclosure requirements and effective legal remedies and deterrents, all of which HK still sorely lacks. We make proposals for those. (8-Jun-2009)
Tycoons whinge over blackout period
Tycoons are making a last-minute effort to undo a HK Listing Rule change which will prohibit directors from dealing between the end of a financial period and the release of the results, starting from 1-Jan-09. The regulators should not U-turn. (23-Dec-2008)
Stock Exchange launches lunchtime shocks
Under "minor listing rule amendments" announced tonight, HKEx will allow companies to release unscheduled price-sensitive information during lunchtime, leaving outstanding orders from the morning session at risk of being hit. (1-Feb-2008)
Company and certain directors v SEHK
HK Court of Final Appeal, 6-Apr-2006
Blackout on Receivables
If you saw the lights dim recently, it was because the Stock Exchange scrapped a requirement for listed companies to disclose large accounts receivable, which could have warned investors about impending disaster. Dressed up as a "minor and housekeeping" rule amendment without consultation, the change is illustrative of the urgent need to increase investor representation on the Listing Committee, to produce pro-investor policy reform. And that's where HK needs your help. (24-Mar-2006)
CSFB's Toxic Convertibles lifts the lid on the toxic convertibles scam in HK, in which small, mostly naive companies surrender control over future equity issuance to an investment bank, whose principal interest is to lock in a profit by converting bonds on a rolling basis at a deep discount to market and selling the resulting shares. CSFB has led the way down this value-destroying path, with Merrill Lynch recently joining the fray. We estimate that the banks make a gross profit on money raised of about 31%, and the average stock price has fallen 30% since a toxic convertible was launched. If you are a listed company, just say no. If you are an institutional investor, take your business elsewhere. (8-Jun-2005)
Company and certain directors v SEHK
HK Court of Appeal, 27-May-2005
Toxic IPOs in HK
In this epic article, we take you through the IPOs of at least 14 listed companies, 3 of which have already led to criminal charges. We explain the inter-relationships between the companies, sponsors, lead managers, auditors and the INEDs. Before you buy another IPO, stop and read this article. (21-Mar-2005)
Listing Committee Reviewed
The latest proposed rehash of the Listing Committee offers little for investors. Although they own the entire free float and over half the market cap, investors would be in an 8:20 minority on the issuer-dominated committee which makes the Listing Rules of the front-line regulator. The consultation itself represents a leap backwards in transparency, and we take the unprecedented step of urging investors to boycott the process. (20-Feb-2005)
MTRC (0066): wholesale waiver of connected transaction Rules
Company announcement, 12-Jan-2005
Because it "has been a public sector transport provider". Its past status is irrelevant - it is now a listed company and hence in the private sector, and minority shareholders should have the usual rights to approve connected transactions under the Listing Rules.
Company and certain directors v SEHK
HK Court of First Instance, 3-May-2004
The Trust Loophole
In a revamp of our loophole series, we are going to document them one at a time, in the hope that regulators may do something about them . We start with the Trust Loophole in the Listing Rules, through which HKEx itself has passed. Three years after we first reported this software bug, it has still not been fixed. (13-Aug-2003)
HKEx responds to the Report by the Expert Group
Company media release, 21-Mar-2003
Financial Secretary's response to Expert Group recommendationsTranscript
HK Government, 21-Mar-2003
"We will work with relevant parties, particularly SFC and HKEx, to draw up a programme for implementing the Expert Group's recommendations for the transfer of listing functions. We will put forward a proposal to the Executive Council as soon as possible."
Report by the Expert Group on securities and futures market regulatory structureMedia release
HK Government, 21-Mar-2003
HKEX listing rules - finally
Investor Relations magazine, 24-Jan-2003
Investors don't count at HKEx
HKEx has released the conclusions of its year-old consultation on the Listing Rules, and in an outrageous disregard of investor interests, it has counted 337 responses submitted via as a single submission, while counting everyone else in the total of 167, including 110 listed companies, separately. Opponents of Article 23 must be wondering if their petitions will be treated in the same way. (19-Jan-2003)
PIPSI Report
The report by the Government-appointed Panel of Inquiry into the recent "Penny Stocks Incident" was released on Tuesday. looks beyond the blame game and into the recommendations for structural reform of the regulatory system. (15-Sep-2002)
PIPSI Submission
The HK Financial Secretary appointed a 2-man Panel of Inquiry into the recent "Penny Stocks Incident". In the interests of transparency, is publishing the letter we received from PIPSI and our submission in response. (18-Aug-2002)
The Delisting Fiasco
Despite clear warnings of the consequences, HKEx on Thursday announced proposals to delist companies that fail to meet certain criteria of market cap, shareholders equity, profitability, clean audit reports or nominal share prices. The rational consequence was a crash in micro-cap stocks on Friday, followed by a hurried Sunday afternoon withdrawal of the proposals, for now at least. We give you the background. (29-Jul-2002)
Listing Rules Review Part 5: Rules Roundup
We're almost out of time on the Listing Rules consultation, which closes next Monday, so this final part of our review covers some of the remaining issues from the 176 page document. We look at notifiable transactions, directors' pay and share dealings, connected transactions, battles for control of the board, and the availability of basic corporate documents. (17-Apr-2002)
Submission to SEHK on Listing Rules Review
Listing Rules Review Part 4: Show us the Money
In Part 4 of our review of the proposed Listing Rule changes, we look at the proposals on financial reporting, including the long-awaited move to quarterly statements. When directors and controlling shareholders know what is going on daily, why shouldn't all other shareholders be told quarterly? Suggestions from HSBC and others that the market, for its own good, shouldn't be told too much too often, are disingenuous nonsense. (28-Mar-2002)
Listing Rules Review Part 3: Count the Votes
In Part 3 of our review of the proposed Listing Rule changes, we look at shareholder democracy, Hong Kong style. Institutions we speak to are often surprised to hear that their votes are seldom counted. Companies persist in an easily-rigged show-of-hands system which hails from Victorian town halls. The Exchange fails to address this adequately. But we have a plan: if they don't fix it, then we will. (11-Mar-2002)
Listing Rules Review Part 2: Board Games
In Part 2 of our review of the proposed Listing Rule changes, we look at the fundamental question of independent directors and committees. Here again, the SEHK wins a perfect 6.0 in the "form over substance" category. They are skating on thin ice by allowing controlling shareholders to elect " independent" directors, a system which has failed to prevent numerous horror stories on Independent directors should be elected by independent shareholders. (21-Feb-2002)
Listing rules amended to require electronic filing of documents
SEHK, 5-Feb-2002
This includes annual reports, interim reports and circulars sent to shareholders, effective 15-Feb-2002.
Listing Rules Review Part 1: Stop Displacement
The SEHK has published a long-awaited consultation paper on amendments to the corporate governance aspects of its Listing Rules. It's 175 pages long, so we'll being covering this in a series of articles before making our concluding submission. We start with the general placing mandate for non-pre-emptive issues, where the Exchange proposes cosmetic changes which fail to bring Hong Kong up to international best practice. (23-Jan-2002)
Hobson's Choice on Privatisations highlights a growing trend for controlling shareholders to threaten minority shareholders with the following choice: take our undervalued offer, or risk having your shares delisted anyway, and losing the regulatory protection and liquidity of the stock market. We call for a change in the Listing Rules that make this possible, and we also deal with the obsolete requirement for a 25% free float rather than just a minimum dollar value. (14-Jan-2001)
The Independent Panda
Following our scoop that Vincent Lo's Shui On Group had an undisclosed interest in Panda-Recruit, the company put out an announcement which defined "independent" in a piece of legal dissection not seen since Bill Clinton's definition of "is". This affair highlights a much wider loophole in the Stock Exchange's definition of connected parties, as we explain. (11-Aug-2000)
Your views on GEM's Rules
In a successful start to Listing Rule consultations over the internet, readers of have made their views known to GEM. By the deadline of 30-Jun-00, 55 submissions had been made, with a further 6 received in the week after the deadline. The total is 3 times the number of submissions that might typically be received by the Exchange. Here's what you had to say... (9-Jul-2000)
Views on the GEM consultation
This page contains the views of on the GEM consultation paper. Read them, decide whether you agree, then submit your view to the SEHK using our special form. (26-Jun-2000)
No Exceptions?
Two months ago the SEHK and SFC introduced standardised waivers of the GEM listing rules. Despite its denials of preferential treatment, the Exchange has still not levelled the playing field by tightening the waivers on share options and lock-ups granted to and Indeed, the wording on's option limit has been relaxed further. Now the Exchange proposes a similar amendment to the option limits on the main board. Dilution city here we come. (14-May-2000)
Webb cites dickens of hurry over Tom
South China Morning Post, 23-Feb-2000
GEM (the SEHK's 2nd board)
An outline and commentary on the proposals for a second board in Hong Kong. (3-Oct-1999)
Submission to SEHK on Financial Disclosure consultation
Response to consultation paper on a Proposed New Market for Emerging Companies
David Webb's submission to The Stock Exchange of Hong Kong on what later became GEM. (20-Jul-1998)
Consultation on a proposed new listing status
SEHK, 9-Sep-1991
This document was catalysed by a request from the Jardine Matheson Group to have a trading-only listing in HK after it shifted its Primary Listing to the UK, even though most of the trading volume was expected to remain in HK. Ultimately SEHK did not proceed with the proposal, and the 5 Jardine companies moved their primary listing to the UK. HK became a secondary listing but the group in 1994 delisted from HK.

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