The pace of IPO applications in Hong Kong stocks has not slowed; the reform of the listing mechanism does not currently involve the "Red Chip" structure.

Since the beginning of this year, 30 new stocks have been listed in the Hong Kong stock market (29 IPOs and 1 introduction listing), including 29 on the main board and 1 on the GEM, raising a total of over HKD 100 billion.

Just as the Hong Kong Securities and Futures Commission tightens control over the quality of IPO listing documents and even limits the number of signature items for sponsors, the number of IPO applications submitted in Hong Kong has not decreased this year. From January to February, as many as 164 applications for main board listings were filed, and the Hong Kong Stock Exchange may be processing over 500 IPO applications in total.

However, recent market rumors suggest that companies with red-chip structures are not being accepted for listing in Hong Kong. An analyst from a Chinese investment bank explained that the fact-checking process for mainland companies going public in Hong Kong involves not only the Hong Kong Stock Exchange but also requires filing with the China Securities Regulatory Commission. The first-phase listing rule amendments and planned listing mechanism reforms by the HKEX do not currently involve “red-chip” companies. As of now, only one red-chip company has received a filing notice this year.

The speed of Hong Kong IPO applications remains unchanged

In December last year, the Hong Kong Securities and Futures Commission and the HKEX jointly sent a letter to IPO guarantors, requiring them to ensure the quality of listing application documents. Subsequently, there were reports that regulators would limit the number of signature items for sponsors.

This move attracted widespread attention and response from the market. During the National People’s Congress and the Chinese People’s Political Consultative Conference, Tam Yue-hang, a member of the National Committee of the Chinese People’s Political Consultative Conference and Honorary President of the Hong Kong Chinese Securities Association, suggested that the quality of Hong Kong IPOs should be strictly controlled to avoid damaging Hong Kong’s international reputation. He emphasized the need for a forward-looking approach to safeguard Hong Kong’s capital market and promote healthy, sustainable development.

However, the pace of IPO applications in Hong Kong has not slowed this year; in fact, the number of new applications in January and February far exceeded that of the same period last year.

Data disclosed by the HKEX shows that from January to February, 164 main board IPO applications were accepted. Including existing applications from 2025 that are still pending and reapplications, the total reaches 530, not counting 8 GEM listing applications. Some applications have exceeded processing deadlines, and there are 29 applications that have been rejected, returned, or withdrawn, as well as IPO projects that have already been listed or not approved by the Listing Committee.

Previously, Wu Jiexuan, head of listing at HKEX, emphasized to reporters: “The previous regulatory warning mainly concerned the quality of listing documents. The quality of listing application materials does not equate to the quality of the listed companies. HKEX has always maintained strict requirements for the quality of listed companies. Ensuring the quality of companies and protecting investors are not mutually exclusive goals; both can be achieved simultaneously.”

Listing mechanism reforms do not currently involve “red-chip” companies

Recently, HKEX has optimized its listing rules, relaxing the thresholds for innovative companies with different voting rights, allowing a maximum ratio of 20:1; improved rules for secondary listings to facilitate overseas issuers listing in Hong Kong; and permitted all new companies planning to IPO to file confidentially, while strengthening the return mechanism.

This is the first phase of HKEX’s listing rule revisions and does not involve adjustments to “red-chip” structures, nor has it been mentioned in future reform plans.

Recently, HKEX Listing Committee Chairman Wong Ka-shing revealed that, beyond the first phase of rule revisions, HKEX also plans to conduct market consultations on establishing alternative trading platforms and review the listing systems for special purpose acquisition companies (SPACs) and technology-focused companies.

It is foreseeable that the listing systems for SPACs and tech companies may be further optimized and revised in the future. However, HKEX is unlikely to arbitrarily exclude “red-chip” companies without reason.

A Chinese investment banker analyzed that “red-chip” companies cannot be generalized. Some “red-chip” structures may involve violations or lack necessity, and could be suspected of asset transfer or regulatory evasion, requiring further feedback. There is also the possibility that companies may need to dismantle their “red-chip” structures before reapplying for an IPO.

In fact, according to filing progress, as of March 20, a total of 41 mainland IPO applications have been filed with the China Securities Regulatory Commission for listing in Hong Kong this year, of which only one is a “red-chip” structure—Manycore Tech Inc. (群核科技)—which submitted its overseas issuance and listing filing materials through its domestic operating entity, Hangzhou Manycore Information Technology Co., Ltd.

(Original source: Securities Times)