LCQ20: Reforming Growth Enterprise Market
17.5.2023

Following is a question by the Hon Adrian Ho and a written reply by the Secretary for Financial Services and the Treasury, Mr Christopher Hui, in the Legislative Council today (May 17): Question: There are views pointing out that the authorities' amendments to the Growth Enterprise Market (GEM) Listing Rules in 2018 to raise the GEM admission requirements and remove the streamlined process for transfer of listings from GEM to the Main Board (GEM Streamlined Process) have increased the difficulties of small and medium enterprises (SMEs) in financing, and as Hong Kong is now at a critical stage of economic reopening, GEM should be fully utilised as the most convenient financing channel for SMEs and innovative enterprises in Hong Kong. Moreover, the Financial Secretary has indicated in the 2023-24 Budget that the Hong Kong Exchanges and Clearing Limited (HKEX) will put forward specific reform recommendations on GEM within this year. In this connection, will the Government inform this Council: (1) whether it knows if the HKEX will be able to finish and make public the specific reform recommendations on GEM within this year as scheduled; (2) whether it has plans to set up an advisory committee to help promote the enhancement of GEM and invite members of the industry to join it, so as to establish a more effective communication channel, thereby enhancing the authorities' understanding of the needs of the market; (3) whether it has formulated a comprehensive plan for the enhanced GEM (including bringing in technology start-ups from abroad to list on GEM), so as to increase the vibrancy of and attention to GEM, and facilitate it to serve its functions and drive up the number of listed companies and the trading volume; if so, of the details; if not, the reasons for that; and (4) whether it will, in response to market changes and demands of members of the industry, consider resuming the implementation of the GEM Streamlined Process, so that GEM can serve as a springboard for SMEs to list on the Main Board and provide better fund-raising opportunities for such enterprises? Reply: President, Since establishment in 1999, the Listing Rules of the Growth Enterprise Market (which is called GEM at present) have been revised a number of times having regard to changing market conditions. In 2018, GEM was repositioned as a stand-alone board. In consultation with the Hong Kong Exchanges and Clearing Limited (HKEX) and the Securities and Futures Commission (SFC), my reply to the four parts of the question is as follows: (1) The HKEX has engaged different stakeholders over the past year, including industry associations, professional bodies, issuers, institutional investors, etc, in taking forward the review of GEM. As mentioned by the Financial Secretary in the 2023-24 Budget, HKEX will put forward specific reform proposals on GEM within this year for formal consultation. (2) Under the current listing regulatory mechanism, listing matters of material significance (including amendments to the GEM Listing Rules) must be approved by the Listing Committee in addition to the Listing Division of the HKEX. Apart from the chief executive of the HKEX as an ex-officio member, other members of the Listing Committee (including the Chairman) are from various sectors, including no fewer than eight investor representatives and 19 representatives from different sectors of the securities industry. The HKEX has established a dedicated sub-committee under the Listing Committee to focus on the review of GEM, soliciting views from investors and representatives of the securities industry. The Government will also continue to facilitate the HKEX in engaging other stakeholders to grasp the views of different sectors more comprehensively. (3) and (4) The Government understands that there are diverse market views on enhancing the various aspects of GEM. In this connection, we have asked the HKEX to examine issues involved holistically, including reviewing the listing regime and the trading mechanism of the secondary market. The primary objective of enhancing GEM is to enable the market to deliver its functions in promoting the listing of enterprises and trading volume on GEM. The work concerned will focus on strengthening the overall attractiveness of GEM to issuers and investors, which involves multiple aspects such as identifying the source of potential issuers from different places; assessing whether potential issuers could attract investors to hold and trade relevant securities continuously; improving the liquidity of existing stocks; considering relevant risk management measures, etc. Alongside facilitating different types of enterprises to list and raise funds in Hong Kong, the review will also take account of protecting the interest of the investing public. The suggestion of re-introducing the streamlined transfer mechanism as raised in the question will be considered as part of the review by the HKEX. Meanwhile, the HKEX will make reference to the experiences of similar markets in other places, including the development of the fundraising platforms for small and medium as well as innovative enterprises in the Mainland.