Scott Murdoch and Alun Johnson

HONG KONG (Reuters), – Three people familiar with the issue said that investment banks and corporate advisors were pushing back against Hong Kong’s new rules regarding blank check listings. They claim they are too complicated and would not increase the city’s competitiveness.

The deadline for interested parties to submit submissions to the Hong Kong Stock Exchange regarding its proposal framework for Special Purpose Acquisition Companies, (SPACs) is Oct. 31,

At a time that rival Asian financial hub Singapore is moving ahead with plans to permit SPACs. SPACs are able to raise funds on stock market to purchase private companies. This gives these businesses a fast and inexpensive route to a listing.

Sources who worked on the submissions said that key concerns were raised by the requirement that SPAC deals be at least HK$1billion ($130m) in value. This excludes small buyout targets.

These sources weren’t authorized to speak with media. They declined to identify themselves.

Proposed rules stipulate that at least 75 professionals must participate in SPAC listings. 40% must be institutional investors. Retail investors can’t join until the company completes its merger. These requirements are likely to render trading imliquid.

Additionally, the rules require that the newly merged entity appoints a financial sponsor who will perform due diligence to meet existing listing requirements. These additional three to six month delays could be added to the listing process.

According to the Financial Services Development Council of the city, “Some practitioners believe it might undermine the intent of offering the SPAC alternative and simplified listing approach.” The council made the following statement in response to Wednesday’s submission.

When Reuters asked the Hong Kong Stock Exchange for comments, it did not respond to whether they would make concessions.

According to its SPAC consultation paper, the bourse doesn’t want to duplicate U.S. SPAC regulations but rather plans to establish a system “tailored for the specific risks and requirements” of Hong Kong. Several proposals include a “high entry point” to SPAC listing applicants as well as De-SPAC targets.

In a statement, the Securities and Futures Commission of Hong Kong stated to Reuters that it will work closely with the exchange in order to consider market feedback as part of finalizing the rules.

According to Refinitiv, there have been almost $137 billion in SPACs worldwide so far for 2021. The pace of deals has fallen sharply https://www.reuters.com/business/finance/how-wall-streets-hottest-dealmaking-trend-fizzled-2021-09-16 since the first quarter, however, with U.S. investors spooked by the vehicles’ poor financial performance and a regulatory crackdown.

Hong Kong continues to debate its rules. Singapore, however, became the first Asian country to permit SPACs last month, making concessions following initial suggestions that were too restrictive.

European asset manager Tikehau Capital is among the first https://www.reuters.com/article/tikehau-capital-listing/asset-manager-tikehau-capital-applies-to-list-spac-on-sgx-sources-idUSKBN2HH05F to plan a SPAC listing in Singapore, sources have told Reuters.

“I think there is a concern that the proposed SPAC regime for Hong Kong is less competitive than that in other jurisdictions,” said Vivian Yiu, a Hong Kong-based capital markets partner at law firm Morrison & Foerster.

She stated that, “while the Stock Exchange has made every effort to protect the markets from abuse and manipulation,” there was still room for flexibility in other areas. Retail investors cannot invest until the de-SPAC process is completed.

Hong Kong authorities spent many years fighting illegal activities related to shell companies’ formation and speculative trade. These are they claim provide markets manipulation opportunities as well as insider deals. These concerns led to strict regulations in 2019, which restrict backdoor listings.