Hong Kong is quickly earning a reputation as the preferred platform for raising corporate capital, particularly among mainland businesses. That's the clear message coming from the 3rd China Hong Kong International Investment Trade Conference, held in Hong Kong recently.

At the event, representatives from a wide range of the Chinese mainland's state-owned and private-sector enterprises met to discuss the increasing importance that Hong Kong's Growth Enterprise Market (GEM) now plays in corporate finance.

The GEM, which was first conceived during the dotcom boom, essentially offers a more relaxed approach to listing that enables businesses to start raising capital much earlier than would be allowed on the primary boards in Hong Kong or the mainland. For instance, GEM's requirements for candidates' track record, registered capital and annual earnings are all significantly lower than the mainland's A-share markets. Perhaps most notably, businesses are not required to post three years of consecutive profits before listing on the GEM.

Fast track to funding

While these advantages were originally tailored to the needs of flourishing high-tech dotcoms, the day-to-day reality of the GEM is that businesses of all descriptions and industries are now discovering the benefits of listing.

"There is a much higher probability for our privately owned companies to be listed on the GEM rather than on mainland exchanges," said a textile manufacturer in comments to the South China Morning Post. "We are planning to buy an already Hong Kong-listed company as a first step to gaining new funding as quickly as possible, and then we'll have our own company listed on the GEM." 

By providing an accessible and meaningful channel for firms wishing to raise much-needed capital, the GEM looks set to play an increasingly important role in the long-term success of many up-and-coming businesses. For investors, too, the GEM represents an outstanding opportunity for diversified investment, providing yet further proof that when it comes to adding value and creating new business momentum, Hong Kong is one of the world's most dynamic markets.

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