New Third Board firms allowed to go listed in HK

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01:21

Chinese companies listed on the National Equities Exchange & Quotation (NEEQ) – also known as New Third Board, an over-the-counter exchange for small and medium firms – are allowed to be listed in Hong Kong without additional approval, according to a memorandum of understanding (MOU) signed by the two exchanges on Saturday.

Those New Third Board listed companies can issue shares and be listed in Hong Kong without being delisted from the exchange, but they must comply with relevant Chinese laws and regulations for overseas stock offering and disclosure measures for listed companies.

The MOU did not unveil the timetable of the partnership in plan.

As of April 20, there are over 11,000 companies trading on the startups-focused New Third Board, with more than 4 trillion yuan in aggregate market value.

Xie Geng, president of NEEQ, said this is the first step toward cross-border and cross-market cooperation for the mainland stock market.

"Our partnership makes it possible for the New Third Board listed companies to go to H-share and access the international financial market without losing any of their domestic investors. It's a new and practical funding model for the 11,000 companies," said Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing.

Although there are some concerns that only a small pool of companies are in place over the new model, analysts believed that many undervalued startups in China could be discovered and recognized by overseas capital.

"The New Third Board trading has been rather inactive. So I think the launch of the 'Plus H-share' model could add in some liquidity, so that the valuations could become more accurate and more market-oriented," said Sun Jianbo, general manager of China Vision Capital.