Financial Institutions in Hong Kong

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Financial Institutions in Hong Kong

• Group 9

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Growth Enterprise Market (GEM)
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Group Member
William Choi Siu Ming 033161
Faith Lai Yuet Fai 033181
Mark Cheung Sun Hei 033214
Kennix Ngan Yan Yu 033230
Aurora Wong Wun Ting 033233
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Agenda

• Introduction of GEM
• The Difficulties of GEM
• Solutions
• GEM vs NASDAQ
• Value of GEM
• Conclusion Suggestion

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Introduction

• What is GEM?
• The Growth Enterprise Market (GEM) started
  operations on 15thNovember1999
• The requirements of listing on the GEM are not as
  strict as Main Board of exchange
• It is a bridge for potential company to grow to
  gradually obtain a listing on Main Board of
  exchange
• At the end of February 2005, there were 205
  companies listed on the GEM Board, with a total
  market capital of HK65 billion

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GEM VS MB
Main Board GEM Board
Operation Records 3 years 2 years
Profit requirement 30 million HKD for first two years 20 million HKD for the latest year No lowest profit requirement
Profit Prediction Not necessary, however, companies are encouraged to do so. Not necessary
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GEM VS MB
Disclosure of information Not allowed to disclose through web pages or any channel for instant message Through the web pages provided by the HKEx
Minimum Public Float 50 million HKD or 25 of the issued shares At least 30 million HKD and 20 of the issued shares
Underwriting Must be underwritten Not necessary
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Problems of GEM Board

• Decreasing amount of Initial Public Offering

Year Number of IPO
1999 7
2000 47
2001 57
2002 57
2003 27
2004 21
October 2005 8
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Problems of GEM Board

• The total amount of fund raised by IPO through
  GEM is also in a decreasing trend

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Problems of GEM Board

• Decreasing amount of turnover

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Problems of GEM Board

• Low quality stocks
• Some of these companies have moved to the Main
  Board already.
• They are high quality stocks, and can pass the
  barriers of listing in the Main Board.
• e.g. tom.com and SUNevision

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Solutions Suggested by HKEx

• Market maker
• Higher standard for entering the Main Board
• Improve the internal management and performance
  of companies

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GEM vs NASDAQ

• What is NASDAQ?
• The largest U.S. electronic stock market with
  approximately 3,200 companies
• The worlds first electronic stock market
• Many leading companies are listed on NASDAQ
• E.g. Microsoft, Starbucks, Cisco, Intel

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GEM vs NASDAQ

• Main difference between NASDAQ and GEM board
• NASDAQ is an independent operation system whereas
  GEM is a subsidiary of the Main Board of Hong
  Kong
• Independent operation means that NASDAQ has its
  own trading system, monitory system and list
  requirement
• GEM is only a subsidiary which means it shares
  the same trading system, monitory system,
  standard and force. The difference is only the
  list requirement

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GEM vs NASDAQ
  NASDAQ GEM
Objective Companies related to technology and new established companies For growing companies to raise money
Profit requirement Income from continuing operation before tax over US1M in the latest fiscal year or 2 of last fiscal years No lowest profit requirement
Least Market Value Not less than HK46million when listed US50million
Sponsor Requirements Recognized by Hong Kong Exchange N/A
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GEM vs NASDAQ
  NASDAQ GEM
Financial Report Quarter, interim and annual report Quarter, interim and annual report
Financial Report Quarter, interim and annual report Disclosure of price-sensitive events
Minimum Public Float 110 million shares with market not less then US8 million 25 subject to a minimum of HK30 million
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Value of GEM

• Offers growth enterprises an avenue to raise
  capital
• Offers investors an alternative of investing in
  "high growth, high risk" businesses
• Foster the development of technology industries
  in Hong Kong and the region
• Promotes the development of venture capital
  investments

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Tom Online

• Also known as Tom.com
• Business including
• Internet portal website
• Wireless internet
• Online advertising
• SMS, MMS and WAP
• IVR
• VoIP

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Tom Online
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Tom Online

• Top three ranking in every wireless value added
  service segment

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TongRenTong Technology Co. Ltd.

• Over 300-years-history traditional Chinese
  pharmacy
• Modernized reform of traditional Chinese
  medicines
• Promote modern Chinese medicine into the
  mainstream international pharmaceutical

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TongRenTong Technology Co. Ltd.

• Division distributed in USA, Canada, British,
  Australia and all across the South-East-Asia

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Conclusion

• Investing in the GEM has high risk low return
• The investors are not willing to venture
• There is a decrease in investment in the GEM,
  because of
• insufficient monitoring system
• the economic cycle

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Conclusion

• The GEM board deserves to be kept, because it
  provides companies
• a way to raise capital
• a stepping-stone to be listed on the Main Board
• The GEM should increase its variety of industries
• attract more investors
• reduce the market risk
• the HKEx should introduce
• a more comprehensive member system
• tighter regulatory framework and rule

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Conclusion

• the GEM Board
• to operate more efficiently
• differentiate from the Main Board
• increase the competitiveness of the GEM
• set up a comprehensive system
• increase the variety of industries

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The End

• Thank You

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At least how much does a company need in Market
capitalization at the time of listing on GEM
QA

1. HK20 million
2. HK200 million
3. HK200 billion
4. HK200 trillion

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The Growth Enterprise Market (GEM) started
operations on
QA

1. 15thNovember1997
2. 15thNovember1998
3. 15thNovember1999
4. 15thNovember2000

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The turnover of GEM is
QA

1. Increased then decreasing now
2. Decreased then increasing now
3. Remain unchanged all the time
4. Decreased then remain unchanged