Lexology In-Depth: International Capital Markets – Hong Kong, Edition 15

Rossana Chu

Partner, Hong Kong

Year in review

Developments affecting debt and equity offerings

Enhanced timeframe for new listing application process

The Securities and Futures Commission of Hong Kong (SFC) and The Stock Exchange of Hong Kong Limited (HK Stock Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), jointly announced on 18 October 2024 an enhanced timeframe on approval of new listing applications.[4]

New listing applications are subject to vetting by the SFC and the HK Stock Exchange. The SFC assesses listing applications in accordance with the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (SFO) and the Securities and Futures (Stock Market Listing) Rules (SMLR) promulgated under the Ordinance. Concurrently, the HK Stock Exchange evaluates applications based on the Rules Governing the Listing of Securities on The Hong Kong Stock Exchange Limited (Listing Rules), including suitability for listing. Final decisions on the applications are made by the Listing Committee, which may provide comments on matters relating to eligibility, suitability and the adequacy of disclosures in the listing documents.

While this division of responsibilities is based on sound regulatory principles, it has sometimes drawn concerns before the joint statement on areas such as the lengthy approval timelines, overlapping inquiries, and inconsistent standards when evaluating applicants’ responses.

The new timeframe set out in the joint statement applies to new listing applications filed after the date of such statement. Under the new timeframe, the SFC and the HK Stock Exchange continue to coordinate their regulatory functions in respect of new listing applications and, more importantly, avoid duplication of comments.

Where an application meets all applicable requirements and guidance under the SFO, the SMLR, and the Listing Rules, the SFC and the HK Stock Exchange will indicate any material regulatory concerns after a maximum of two rounds of regulatory comments. Upon confirmation that there are no material regulatory concerns, the disclosures in the listing document can be finalised for consideration by the Listing Committee. In this scenario, each of the SFC and the HK Stock Exchange has a total of about 40 business days to raise comments, and the applicant has around 60 business days to address those comments. Subject to approval by the Listing Committee and other relevant authorities or regulators, the entire application process may be completed within the six-month validity period, thereby enhancing the overall certainty and predictability of the listing timeline.

If an existing A-share listed company (i.e., a company incorporated and listed in an exchange in Chinese Mainland) has a minimum market capitalisation of HK$10 billion and is able to confirm, via a formal opinion of its legal adviser, that it has complied with all laws and regulations applicable to its A-share listing throughout the two full financial years immediately preceding the new listing application made in Hong Kong, then the A-share listed company is eligible for an accelerated timeframe. If its application satisfies all Hong Kong requirements and guidance under the SFO, the SMLR and the Listing Rules, the assessments by the SFC and the HK Stock Exchange can even be completed after one round of regulatory comments. However, if the SFC and/or the HK Stock Exchange have any material regulatory concerns, this accelerated timeframe will not apply.

Nonetheless, if the SFC and/or the HK Stock Exchange expresses any material concerns on a new listing application (whether or not made by a A-share listed company) regarding compliance with the SFO, the SMLR and/or the Listing Rules and/or the quality of the listing document, or if new material developments arise or the applicant’s responses to regulators’ comments are incomplete, the timeline of the application process will be lengthened. In this situation, the SFC and the HK Stock Exchange will proactively engage with the applicant and its sponsor to enhance their understanding of the relevant regulatory concerns. Still, the application progress will then be subject to the applicant satisfactorily addressing those concerns.

Launch of Technology Enterprises Channel for listing applications made by biotech companies and specialist technology companies

In the Hong Kong IPO regime, a listing applicant is normally required to demonstrate its trading records and satisfy the profit, revenue or cash flow requirements. However, there are exceptions to cater for certain types of applicants.

Under Chapter 18A of the Main Board Listing Rules (which took effect in April 2018), a biotech company may seek listing in Hong Kong if it fulfils certain specific criteria even when it has not yet generated any revenue or profit.

Chapter 18C of the Main Board Listing Rules, launched in March 2023, sets out an IPO regime for specialist technology companies to seek listing in Hong Kong even if they do not satisfy the usual profits, revenue and cash flow listing criteria.

The SFC and the HK Stock Exchange jointly announced in May 2025 the launch of a dedicated Technology Enterprises Channel (Channel) to facilitate new listing applications to be made by biotech companies and specialist technology companies.[5] While application proofs of prospectuses are generally required to be published on the HKEX website to promote transparency, the new Channel offers an exception. Biotech and specialist technology companies submitting listing applications under Chapter 18A or Chapter 18C of the Listing Rules may do so on a confidential basis from 6 May 2025 onwards. This arrangement helps mitigate the risk of premature disclosure of their products, technologies, services, and strategic plans.

Under the new Channel, the HK Stock Exchange will engage more closely with the listing applicants to gain a better understanding on their businesses and will provide guidance on their eligibility and suitability for listing. The applicants will have enhanced opportunities to discuss with the HK Stock Exchange on case-specific issues arising under the Listing Rules.

HKEX reduce minimum spreads in Hong Kong securities market

The minimum spreads of securities traded on Hong Kong exchanges are being reduced by 50 per cent to 60 per cent in two phases, to support a more efficient price discovery process and boost liquidity, as announced by HKEX in December 2024.[6] The minimum spread is the minimum price change for a stock traded on an exchange and determines the tightest bid-ask spread allowed. The reductions apply to equities, Real Estate Investment Trusts (REITs) and other applicable securities (excluding Exchange Traded Products, debt securities, Exchange Traded Options and Structured Products).

Phase 1 of the reductions took effect on 8 August 2025. For securities priced between HK$10.00 and HK$20.00, the minimum spread was reduced by 50 per cent from HK$0.02 to HK$0.01. For securities priced between HK$20.00 and HK$50.00, the minimum spread was reduced by 60 per cent from HK$0.05 to HK$0.02.

Phase 2 will apply to securities priced between HK$0.50 and HK$10.00 and will be implemented in mid-2026, subject to a review of Phase 1’s results. The minimum spread is to be reduced from HK$0.010 to HK$0.005.

To facilitate the implementation of the reductions without increasing the overall market trading cost, the stock settlement fee was also restructured and took effect in June 2025, with the minimum and maximum components being removed and replaced with an adjusted fee rate charged on notional value traded.[7]

Reforms in open market requirements and IPO offering mechanisms

HKEX concluded a major consultation and implemented, effective from 4 August 2025, a series of reforms to optimise IPO price discovery and open market requirements.[8] 

Each Hong Kong listed company and new listing applicant must maintain an 'open market' for their listed securities. Thus, HKEX requires a minimum percentage of listed securities to be held by the public (public float), namely not held by the listed company’s core connected persons (e.g., holders of 10 per cent or more shareholding, directors and their close associates) and not financed by the listed group or any core connected person. The public float used to be 25 per cent of the total number of issued shares, or 15 per cent to 25 per cent if the expected market capitalisation is over HK$10 billion at listing.

Effective from 4 August 2025, a listing applicant valued at HK$6 billion or less must maintain a 25 per cent public float. If its market value is between HK$6 billion and HK$30 billion, the public float must be at least 15 per cent or HK$1.5 billion at listing, whichever is higher. For a market value above HK$30 billion, the requirement is the higher of 10 per cent or HK$4.5 billion. Chinese Mainland companies with other listed shares (e.g., A shares) must maintain a H shares public float of at least 10 per cent or HK$3 billion at listing.

At the same time, HKEX introduced a new concept of 'free float' effective from 4 August 2025. If refers to securities available for trading upon listing, and normally means the securities held by the public and not subject to disposal restrictions. Listed shares in free float must either (1) represent at least 10 per cent of total issued shares listed on HKEX with a market value of at least HK$50 million for Main Board or HK$15 million for GEM, or (2) have a market value of at least HK$600 million. For Chinese Mainland companies with other listed shares, H shares in free float must be at least 5 per cent of the total issued shares in that class (usually comprising A Shares and H Shares) or meet the same market value threshold.

In respect of IPO offering mechanism, the Listing Rules have been amended such that, from 4 August 2025 onwards, at least 40 per cent of the offered shares must be allocated to investors in the placing tranche (other than cornerstone investors). In respect of the public subscription tranche, the IPO applicant may select (1) an initial 5 per cent of offered shares to be allocated to the public subscription tranche, subject to clawback of up to 35 per cent offered shares to be allocated to this tranche if public demand is considerable; or (2) a minimum initial allocation of 10 per cent and a maximum of 60 per cent of the offered shares to the public subscription tranche with no clawback mechanism.

Developments affecting derivatives, securitisations and other structured products

Developments in the Stock Connect – expansion of eligibility of exchange-traded funds

The Stock Connect is a mutual market access programme through which investors in Chinese Mainland and Hong Kong can trade and settle shares listed on the other market through the stock exchanges and clearing houses in their home market. The Shanghai-Hong Kong Stock Connect was launched in November 2014 and the Shenzhen-Hong Kong Stock Connect was introduced in December 2016.

Exchange-traded funds (ETFs) were included in the Stock Connect in July 2022. The eligibility ETFs, both Northbound and Southbound, were expanded on 22 July 2024.[9] The updated eligibility criteria include adjustments to the minimum daily average Assets Under Management in the last six months and to the total weightings of the relevant eligible constituents in the benchmark index.[10]

The expansion encourages innovation and product diversity from issuers and allows Stock Connect investors to efficiently allocate assets across Hong Kong and Chinese Mainland markets.

Development in the Swap Connect – introduction of IMM trades, solo compression service and backdated trades to the Swap Connect

The Swap Connect is a mutual access programme linking Hong Kong and the Chinese Mainland’s interbank interest rate swap markets and was launched on 15 May 2023.

Enhancements to the Swap Connect were brought about on 20 May 2024, to mark the programme's first anniversary.[11] First, International Monetary Market (IMM) trades were introduced based on IMM dates, namely the third Wednesday of March, June, September and December, to align with common practices on international interest rate swap markets. Second, the solo compression service was launched, enabling participating institutions to compress trades with equal but opposite economics and unwinding their original cleared trades before the maturity date (thus reducing their capital costs and increasing transaction settlement efficiency). Third, backdated trades were also introduced, enabling trades with a past effective date to be recorded. The backdated trades can be used with solo compression for trade unwinding.

The enhancements will increase flexibility for international investors to manage RMB interest rate risk through China’s onshore interbank markets.

Development in the Swap Connect – acceptance of Chinese government bonds and policy bank bonds as collateral for Swap Connect

OTC Clearing Hong Kong Limited (OTC Clearing), a subsidiary of HKEX, allows offshore investors to use Chinese government bonds and policy bank bonds held through Bond Connect as collateral for Northbound Swap Connect beginning 13 January 2025.[12] The new eligible collateral can be used to cover initial margin requirements of Northbound Swap Connect, providing greater flexibility and capital efficiency to international investors and also further incentivising their bond holdings in the China Interbank Bond Market.

Further, OTC Clearing also starts accepting Chinese government bonds and policy bank bonds held by international investors through Bond Connect as margin collateral for all derivative transactions cleared by OTC Clearing from 21 March 2025 onwards.[13] This effort will further increase the attractiveness of RMB-denominated assets and promote the internationalisation of RMB.

Development in the Swap Connect – interest rate swap contracts with a maximum tenor of 30 years can be traded on Northbound Swap Connect

Effective on 30 June 2025, interest rate swap contracts with a maximum tenor of 30 years can be traded on Northbound Swap Connect.[14] Previously, the longest tenor of interest rate swaps under Swap Connect was 10 years. This enhancement further supports the diversified risk-management needs of both Chinese and international institutions, including insurance companies and pension funds, by matching the swaps tenors with the duration of their long-term bond holdings. International investors may also adopt more sophisticated trading strategies in their asset allocations in RMB-denominated products.

Cases and dispute settlement

Disqualification order against a director of a listed company

The Court of First Instance of Hong Kong issued a disqualification order in July 2025 against Mr Zhang Yuqing (Zhang), the former vice-chairman and executive director of Zhongda International Holdings Limited (Zhongda), which was a Hong Kong-listed company.[15] 

The SFC’s complaints against Zhang were mainly of three aspects: (1) the board of Zhongda had approved the transfer of RMB150 million to repay intra-group loans and other bank debts, but the fund was transferred to two private companies controlled by two other former executive directors of Zhongda (Xu Brothers). Zhang failed to promptly notify the board of such unauthorised fund transfer, (2) Zhongda’s 20 per cent stake in an entity, Zhongwei Bus, was disposed of at a significantly undervalued price to a private company owned or controlled by the Xu Brothers, without any proceeds being paid to Zhongda or its subsidiaries, as a director of Zhongwei Bus and Zhongda, Zhang failed to take steps to prevent or report such illegitimate stake transfer, (3) in light of his awareness of both the unauthorised fund transfer and the improper disposal of stake in Zhongwei Bus, Zhang ought to have recognised that Zhongda’s interim financial statements failed to disclose those irregularities. Despite this, he proceeded to approve the publication of Zhongda’s then interim results which, due to the irregularities, contained false or misleading information.

Although no allegation was made that Zhang was personally benefited from these irregularities, the Court imposed a six-year disqualification on Zhang. The takeaway of this case is that a director of a Hong Kong listed company, by dereliction of his fiduciary duties, has to bear legal liabilities even in the absence of personal gains. The consequences can extend beyond the director’s breach of Listing Rules or the delisting of the company.

Hong Kong Court imposed imprisonment for fraud over secret backdoor listing

Mr Chim Pui-chung (Chim PC) became a substantial shareholder of Asia Resources Holdings Limited (Asia Resources), a Hong Kong listed company, in late 2008. His son, Mr Ricky Chim Kim Lun (Ricky Chim), was appointed as an executive director of Asia Resources and served as chairman of its board of directors between December 2008 and December 2014.

In July 2013, Chim PC and Ricky Chim made an agreement with Mr Ma Zhonghong (Ma) in private to sell 70 per cent to 75 per cent of shares in Asia Resources controlled by Chim PC to Ma for HK$210 million. The SFC characterised the arrangement as a ‘backdoor listing’ agreement, as it would enable Ma to assume control over the listed company and potentially inject businesses or assets into it without subjecting them to the stringent listing approval process.

Ricky Chim chaired two board meetings in late July and early August 2013 at which the board approved the placement of new shares and the issuance of convertible notes to raise over HK$550 million. Ricky Chim voted in favour of the resolutions. He declared that he had no personal interest in the transactions and failed to disclose the backdoor listing agreement to the board. The share placement was completed by late July 2013.

In August and September 2013, Asia Resources issued an announcement and a circular on the proposed issue of convertible notes (which required shareholders’ approval), asserting that no directors or shareholders had a material interest and that no shareholders were required to abstain from voting. At the company’s special general meeting held in October 2013, Chim PC voted in support of the issuance, and the resolution was passed by shareholders.

Chim PC and Ricky Chim concealed the true purpose of the capital-raising exercise from HKEX and as a result, HKEX approved the related disclosures without being aware of the underlying backdoor listing arrangement.

About one month after the capital-raising was approved, Chim PC had received HK$169 million from Ma under the backdoor listing agreement.

The Court held that Chim PC and Ricky Chim were guilty of two counts of conspiracy to defraud Asia Resources, its board of directors and shareholders as well as HKEX, because they had concealed and misrepresented the nature of the relevant transactions, thereby preventing shareholders from assessing the associated risks and exercising their rights, and obstructing the HKEX from performing its regulatory functions.[16] The Court imposed a 34-month imprisonment sentence on Chim PC and a 37-month sentence on Ricky Chim.[17]

This case garnered extensive media coverage partly due to Chim PC’s prominence and his prior tenure as a long-serving member of the Hong Kong Legislative Council. Additionally, while entering into an agreement to acquire or dispose of a controlling stake in a Hong Kong-listed company is not unlawful in itself, the illegality arises from the concealment of such arrangements and the material misrepresentations made in public disclosures and regulatory communications by the listed company.

Relevant tax and insolvency laws

Hong Kong enacted legislation on BEPS 2.0 Pillar Two

BEPS (Base Erosion and Profit Shifting) is a project launched by the OECD (Organisation for Economic Co-operation and Development) and G20. BEPS 2.0 Pillar Two is a global tax framework designed to ensure large multinational enterprises (MNEs) pay a minimum level of tax, typically 15 per cent, on the income in each jurisdiction where they operate. Its primary goal is to limit profit shifting to low-tax jurisdictions.

On 6 June 2025, Hong Kong enacted legislation to implement BEPS 2.0 Pillar Two, which covers MNEs with consolidated revenue of at least €750 million for at least two years out of four years preceding the fiscal year, except for certain regulated exclusions. Under the legislation, the Hong Kong Minimum Top-up Tax and the Income Inclusive Rule apply retroactively from 1 January 2025 to the Hong Kong constituent entities (including joint ventures) of those in-scope MNEs, with relief available to avoid double taxation.

The Hong Kong Inland Revenue Department has established deadlines for the submission of annual top-up tax notifications and annual top-up tax returns. Existing tax administration mechanisms are extended to cover the Pillar Two rules, and mutual agreement procedures are in place to facilitate the resolution of cross-border disputes arising from top-up tax assessments.

Beneficial vs legal owners of a debt instrument in an insolvency case

China Evergrande Group (Evergrande) was formerly a Hong Kong-listed company. It was heavily indebted under a series of secured notes and HKD convertible bonds (Notes). The Notes were held in global form by a nominee under a clearing system, with a trustee holding Notes for the benefit of the Notes investors and administering the investors’ rights in the Notes. Despite owning the beneficial and economic interests in the Notes, no investors are 'legal owners' of the Notes.

Upon the winding-up of Evergrande, the liquidators applied to the Court for directions on whether the Notes investors could be appointed as members of the committee of inspection. The Court held that the word 'creditor' refers to a person holding a legal right over a debt or liability owed by the company as at commencement of the liquidation. Thus, the Notes investors who hold merely beneficial or economic interests in the Notes cannot take any action against Evergrande and can only do so through the legal owner of the Notes.[18] 

Role of exchanges, central counterparties and rating agencies

HKEX adds Abu Dhabi Securities Exchange and Dubai Financial Market as Recognised Stock Exchanges

In July 2024, HKEX announced that two stock markets from the United Arab Emirates — the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM) — have been added to HKEX’s list of Recognised Stock Exchanges. This means companies already listed on these exchanges may apply for a secondary listing in Hong Kong.[19] This move makes it easier for UAE-listed companies to tap into the Hong Kong capital market, which is home to a diverse investor base.

With ADX and DFM included, HKEX has recognised three Middle Eastern exchanges in total, following the addition of Saudi Arabia’s Tadawul in 2023. As of 3 October 2025, HKEX’s list includes 20 Recognised Stock Exchanges worldwide.

HKEX strengthens connectivity with Abu Dhabi Securities Exchange

In September 2025, HKEX announced that it has signed a memorandum of understanding with Abu Dhabi Securities Exchange (ADX) to increase connectivity between the two exchanges.[20] HKEX and ADX will look into joint initiatives in market promotion, exchange-traded funds, ESG-related products, cross listings and other areas of mutual interest.

HKEX to launch HKEX Virtual Asset Index Series

HKEX launched the HKEX Virtual Asset Index Series on 15 November 2024.[21] The Index Series consist of the Reference Index for Bitcoin and Ether, respectively, as well as the Reference Rate for Bitcoin and Ether. The Reference Index is a 24-hour volume weighted reference spot price of Bitcoin or Ether, using prices aggregated from top-rated virtual asset exchanges, calculated in real-time and denominated in US dollars. The Reference Rate is designed for the settlement of financial products, calculated daily at 4:00 pm Hong Kong time. Such Index Series are the first EU Benchmarks Regulation-compliant virtual asset index series developed in Hong Kong. The Index Series give transparent real-time benchmarks for Bitcoin and Ether pricing in the Asian time zone.

HKEX introduces Fund Repository on Integrated Fund Platform

HKEX launched a Fund Repository on its Integrated Fund Platform on 13 December 2024.[22] The repository provides streamlined access to information on over 2,000 SFC authorised funds. The repository provides information on the name, type (listed or unlisted), category, base currency, domicile, amount of assets under management, SFC authorisation date, name of fund manager and identities of trustee/custodian. It also includes fund documents such as key fact statements, prospectuses, financial reports and notices/announcements.

Further, the Order Routing Service was launched on the Integrated Fund Platform on 3 July 2025. The service transforms the fund order placement process (including subscriptions and redemptions) into an integrated system.[23] 

Collaboration with CMU OmniClear to enhance the post-trade securities infrastructure of Hong Kong’s capital markets

CMU OmniClear Limited (CMU OmniClear) carries out the operations of the Central Moneymarkets Unit on behalf of the Hong Kong Monetary Authority. On 4 March 2025, HKEX signed a memorandum of understanding with CMU OmniClear to jointly explore initiatives to enhance Hong Kong’s post-trade securities infrastructure and to further develop the city’s fixed-income and currencies ecosystem.[24] CMU OmniClear and HKEX will pursue cooperation in areas such as realising cross-asset class efficiencies across equities and fixed income, expanding the mobilisation of Chinese Mainland bonds as collateral, enhancing Hong Kong as a bond issuance centre and developing an international central securities depository in Asia.

Enhance carbon market ecosystem in Greater Bay Area

HKEX has signed a memorandum of understanding with Guangzhou Emissions Exchange, Shenzhen Green Exchange and Macao International Carbon Emission Exchange on 23 September 2025 to cooperate in accelerating the carbon markets and green finance ecosystem development across the Greater Bay Area.[25] 

Other strategic considerations

The top four strategic priorities of Hong Kong for 2024 to 2026, as announced by the SFC, are (1) to maintain market resilience and mitigating serious harm to Hong Kong’s financial markets, (2) to enhance the global competitiveness and appeal of Hong Kong capital markets by deepening connections with Chinese Mainland's capital markets and expanding overseas networks, (3) to lead financial market transformation through technology and ESG and (4) to enhance institutional resilience and operational efficiency.[26] 

Outlook and conclusions

The above demonstrates that Hong Kong is actively implementing the SFC strategic priorities and moving in the right direction. However, in an increasingly complex and dynamic global environment, continued effort and vigilance remain essential.

This material has been prepared for general informational purposes only and is not intended to be relied upon as professional advice. Please contact us for specific advice.

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