Capital Markets Quarterly - April 2024

Howse William’s Capital Markets Quarterly aims to provide you an overview of the various regulatory and market updates in the first quarter of 2024, with summaries of some of the key amendments in the rules and guidelines, as well as important decisions made by the regulatory authorities in Hong Kong. We will also highlight some of the major market transactions over the last 3 months.


A) Regulatory Update


The Stock Exchange of Hong Kong Limited (the "Exchange")




In light of the GEM listing reforms that took effect on 1 January 2024 (the "GEM Listing Reforms"), the Exchange published FAQs No. 138-2024 to 155-2024 on the same day to assist listing applicants and listed issuers to understand and comply with the relevant Listing Rules. The FAQ addresses and clarifies various aspects of the GEM Listing Reforms, including but not limited to, the market capitalisation requirements, inclusion of debt securities in market capitalisation calculations, timing of submission of transfer applications, compliance record requirements, and vetting of announcements in relation to transfer of listing.


The Exchange’s Disciplinary Actions

In the first quarter of 2024, the Exchange published sanctions in 3 cases which involve (i) transactions involving connected parties or failure to disclose and comply with procedural requirements, (ii) directors’ failure to safeguard listed issuer’s interests and cooperate in investigations, and (iii) deficiencies in the listed issuer’s internal controls and risk management systems. Listed issuers should exercise caution and put in place proper check and balance, and transaction monitoring mechanisms.


News release date

Issuer/ directors involved – summary of conduct



5 March 2024

Two former directors of Global Uin Intelligence Holdings Limited (formerly known as Global Dining Holdings Limited and Singapore Food Holdings Limited) (Stock Code: 8496)

  • The Exchange discovered that when the listed issuer was listed in May 2020, it paid the sum of SGD 1 million to an IPO consultant in Singapore for purported IPO consultancy services. The payment caused the actual listing expenses to exceed the estimated listing expenses disclosed in the prospectus.
  • The Exchange then referred the matter to the SFC whose investigation found that the payment was subsequently rerouted by the IPO consultant to a joint bank account held by two former executive directors, who were also the Singapore-residing founder and controlling shareholders, in Singapore.
  • The GEM Listing Committee has made findings that the two former executive directors misappropriated the listed issuer’s assets using the rerouting arrangement.
  • Although the two former executive directors subsequently procured the refund of the payment from the IPO consultant to the listed issuer, the GEM Listing Committee found them to have committed serious breaches of their fiduciary duties to the listed issuer and the Listing Rules.
  • In addition to a public censure, Director Unsuitability Statements were imposed against the two former directors.


27 February 2024


China Gas Industry Investment Holdings Co. Ltd. (Stock Code: 1940) and a former director

  • The listed issuer used a substantial proportion of its funds shortly before and after listing to provide three unsecured loans and subscribe for a loan note. The unsecured loans, representing more than 36% of the expected net listing proceeds, were granted at an interest rate that was much lower than the effective interest rates being paid by the listed issuers to its own lenders.
  • There was no disclosure of the transactions, or their potential risks, in the prospectus. As a result, the prospectus was misleading.
  • The listed issuer subsequently made a full loss allowance of RMB118 million and RMB66.4 million on the loan and loan note receivables respectively.
  • The former director entered into all four transactions on the listed issuer’s behalf without seeking the approval of the board of directors and without consulting the listed issuer’s sponsor and compliance adviser.
  • His entry into the transactions was also in breach of the listed issuer’s internal control policy. The former director was unable to explain the commercial rationale for the loans.
  • The former director later sought the board’s endorsement of a proposed put option arrangement, under which the listed issuer could be obliged to buy its own shares from a vendor. The former director neither knew, nor had performed any background or credit assessment of, the proposed vendor.
  • The former director failed to discharge his directors’ duties and/or obligations in approving the four transactions and in proposing the draft put option agreement. He also failed to protect the listed issuer’s interest and to use his best endeavours to procure the listed issuer’s Listing Rule compliance in respect of the transactions and/or their disclosure.
  • The listed issuer was criticised.
  • In addition to a public censure, a Prejudice to Investors' Investments Statement was imposed against the former director.


20 February 2024

Three current directors of Xinming China Holdings Limited (Stock Code: 2699)

  • This matter concerns an impairment loss in connection with a number of loans obtained by one of the listed issuer’s subsidiaries.
  • In early 2016, the listed issuer’s subsidiary (the "Company") had cash flow difficulties and was unable to secure funding. One of the listed issuer's directors offered to raise funds through a company owned by himself and his wife ("XGL").
  • XGL would borrow money from private investors (the "Lenders") on behalf of the Company. XGL obtained a loan of RMB 178 million in total for the Company between March and June 2016. The Company was able to repay these loans, but its financial situation remained dire.
  • From August 2016 to January 2017, XGL obtained additional loans of RMB 323.5 million from the Lenders. However, the Company could only repay a portion of these loans and requested an extension. The Lenders demanded a retroactive default interest of 24% per annum as a condition for extending the repayment period.
  • The Company disagreed with the default interest rate, and asked XGL to continue negotiating with the Lenders. Ongoing negotiations resulted in no repayments of the loans being made to the Lenders in 2017.
  • In early 2018, hostile debt collectors were sent by the Lenders to demand immediate repayment. To avoid disruption to the Company's operations, one of the listed issuer's directors agreed to pay the default interest without informing the listed issuer's board of directors (the "Board"). XGL settled the outstanding principal and default interest on behalf of the Company. However, the Company repaid only the remaining loans principal to XGL but not the default interest.
  • Another director of the listed issuer recorded the default interest paid by XGL as "other receivables" in the Company's financial statements, based on the assumption that XGL would negotiate a refund from the Lenders. The basis for treating the default interest as receivables and the expectation of recovering the amount from the Lenders were unclear.
  • Eventually, the listed issuer recorded an impairment loss of RMB 49.4 million on the "other receivables" as of 31 December 2020.
  • The directors in question failed to inform the Board about the loans and the lenders’ demand for a retroactive 24% default interest rate when the loans became overdue. They disregarded the internal control procedures put in place by the listed issuer, and failed to keep proper documentation in respect of the loans.
  • The three directors were censured and further directed to attend training on regulatory and legal topics and Listing Rule compliance, including at least three hours on each of (a) directors’ duties; and (b) the Corporate Governance Code.



Securities and Futures Commission (the “SFC”)


Takeovers Bulletin No. 68


Availability of financial resources until the completion of an offer

Under Note 3 to Rule 3.5 and Schedule I of the Codes on Takeovers and Mergers and Share Buy-backs ("Takeovers Code"), a Rule 3.5 announcement and an offer document should include a confirmation from the offeror’s financial adviser that the offeror has sufficient financial resources to settle the consideration payable upon full acceptance of the offer. Financial advisers should observe the highest standard of care in satisfying themselves of the sufficiency of the offeror’s financial resources.


As explained in Practice Note 15, the financial adviser must submit a signed financial resources confirmation to the Executive of the SFC before the Rule 3.5 announcement is made. The submission should set out the bases for the financial adviser’s confirmation and the due diligence steps it has taken in satisfying that sufficient financial resources are and will be available to satisfy full acceptance of the offer. In addition, an updated confirmation must also be submitted before the Executive of the SFC can clear the offer document for the offer to open for acceptance. It is important that the offeror has sufficient financial resources to discharge its payment obligations until the consideration due is settled.


If there are any changes in circumstances that might affect the financial adviser’s bases for its confirmation, the offeror and its financial adviser should work together to ensure that the offeror continues to have sufficient financial resources to satisfy full acceptance of the offer. The Executive of the SFC should be consulted at the earliest opportunity if there is any doubt about the application of the Takeovers Codes.


B) Market Update


There were 36 new Main Board IPO applications accepted by the Exchange and 12 IPOs launched in the first quarter of 2024 that consists of a diverse range of businesses. Examples of some of the recent Main Board listings are:




Migao Group Holdings Limited (Stock Code: 9879)

A national potash fertiliser company in China with sourcing and procurement, and processing and manufacturing capabilities selling various potash fertiliser products, including KCL, SOP, NOP and compound fertilisers. Its retail offering was over-subscribed by 8.8 times with an estimated net proceeds from the IPO of approximately HK$784.2 million. To date, its market capitalisation reaches approximately HK$3.67 billion.


Lianlian DigiTech Co., Ltd. - H Shares (Stock Code: 2598)

A digital payment solution provider from China with a global payment capability to serve customers around the world. Its retail offering was over-subscribed by 15.9 times with an estimated net proceeds from the IPO of approximately HK$548.02 million. To date, its market capitalisation reaches approximately HK$3.87 billion.



Palasino Holdings Limited (Stock Code: 2536)

A gaming and leisure group comprising (i) one integrated land-based casino and resort and two full-service land-based casinos operating in the Czech Republic, offering primarily slot machines and table games, and (ii) three hotels in Germany and one hotel in Austria that offer accommodation, catering, conference, and leisure services. Its retail offering was over-subscribed by 15 times with an estimated net proceeds from the IPO of approximately HK$194.1 million. To date, its market capitalisation reaches approximately HK$4.16 billion.


Qyuns Therapeutics Co., Ltd. - B - H Shares (Stock Code: 2509)


A clinical-stage biotech company exclusively focused on biologic therapies for auto immune and allergic diseases. Its retail offering was over-subscribed by 162.2 times with an estimated net proceeds from the IPO of approximately HK$163.27 million. To date, its market capitalisation reaches approximately HK$4.82 billion.


WK Group (Holdings) Limited (Stock Code: 2535)


A structural steelwork contractor, specialising in the supply, fabrication and installation of structural steel for construction projects in Hong Kong. Its retail offering was over-subscribed by 69.5 times with an estimated net proceeds from the IPO of approximately HK$91 million. To date, its market capitalisation reaches approximately HK$1.16 billion.


WellCell Holdings Co., Limited (Stock Code: 2477)

A telecommunication network support and information and communication technology (ICT) integration services provider and software developer in the PRC. Its retail offering was over-subscribed by 27.6 times with an estimated net proceeds from the IPO of approximately HK$62.67 million. To date, its market capitalisation reaches approximately HK$1.50 billion.


Concord Healthcare Group Co., Ltd. - H Shares (Stock Code: 2453)

An oncology healthcare service provider in China serving both cancer patients and third-party medical institutions. Its retail offering was over-subscribed by 1 time with an estimated net proceeds from the IPO of approximately HK$466.36 million. To date, its market capitalisation reaches approximately HK$5.23 billion.



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Disclaimer: The information contained in this article is intended to be a general guide only and is not intended to provide legal advice. Please contact [email protected] if you have any questions about the article.