HKEx considers risk leagues for listed companies

The Hong Kong Exchange and Clearing (HKEx) is considering splitting its listed companies into different leagues according to their risk profiles, the HKEx said last Friday in an in-house publication. The move is aimed at quelling investor concerns of a perceived deterioration in the average quality of Hong Kong’s listed companies.

“The existence of a significant number of poorly-performing companies is still a genuine problem, even if it were only a matter of perception by people not conversant with the market in Hong Kong,” said the exchange.

The segmentation of listed companies would involve the creation of separate boards with different listing criteria, while the exchange is also considering attaching differing prefixes to stock numbers indicating companies with characteristics that might imply different levels of risk.

“Hong Kong’s Main Board covers a huge range of companies, from global concerns to small local enterprises,” said the exchange. “Through such segmentation, the better quality companies could be more readily differentiated and companies which fell below certain thresholds would have an incentive to climb up the ‘ladder’.”

However, the exchange acknowledges that the creation of a risk league is fraught with difficulties – not least of all the difficulty in determining the criteria for the various market tiers, and the likely resistance from companies that are ‘relegated’ to lower leagues.

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