Since 24 November 2023, the HKEX has added the Indonesia Stock Exchange as a Recognized Stock Exchange. This will allow companies with a primary listing on Indonesia Stock Exchange’s (“IDX”) main market that meet certain listing requirements to apply for a secondary listing in Hong Kong. In view of that, there is opportunity for eligible Indonesian companies to apply for dual primary or secondary listing on Hong Kong’s GEM and Main Board respectively.

Here are some unique insights from each perspective of dual primary listing and secondary listing at HKEX.

What are the key advantages of Indonesian companies listed at IDX to be also listed at HKEX?

Fund Raising Ability: As a global financial hub, Hong Kong IPOs provide an excellent opportunity for companies to raise capital. Hong Kong markets have between 2014 and 2023 raised funds reaching HK$2.29 trillion. Further, Hong Kong was first in terms of funds raised in the Southeast Asia and Hong Kong IPO markets, accounting for US$5.94bn in 2023 (as compared to US$3.55bn for Indonesia in 2023) even though Hong Kong was second to Indonesia in terms of IPO numbers in 2023 (79 IPOs for Indonesia as compared to 73 IPOs for Hong Kong). In 2024, HKEX has returned to one of the top 5 stock markets in the world in terms of capital raising.

Gateway to China and International Markets: Hong Kong is Asia's number 1 offshore wealth management centre, and 75+ of the world's top 100 banks have a presence in Hong Kong. As an international city, listing with Hong Kong also provides companies with access to Chinese and international investors as well as media coverage. In particular, certain eligible equities may also be added to the Stock Connect allowing for investors in China to purchase securities directly through their trading and clearing facilities of their home exchange.

Increase Corporate Profile: With companies listed on the HKEx expected to have solid corporate governances, by being listed on the HKEx it will enhance the Company’s profile and recognition among investors and business partners.

Robust Secondary Market: Provides for an additional avenue for share liquidity and access to refinancing activities.

Upon the recognition of IDX by HKEX what are the options available to Indonesian companies listed at IDX to enter into Hong Kong capital market?

Indonesian company is allowed to conduct: (i) dual primary listing, or (ii) secondary listing.

Dual Primary Listing at IDX and HKEX

A dual primary listing can occur when: (i) a company’s shares are already listed and traded on IDX and subsequently apply for a listing on HKEX or (ii) a company at the same of applying for a listing on the IDX also applies for a listing on the HKEX. A dual primary listing means the applicant will need to comply with both listing rules of IDX and HKEX.

Secondary Listing at HKEX

A secondary listing refers to shares being listed on HKEX without the company being fully subject to the listing requirements of that exchange. The primary listing remains on IDX.

Secondary listings usually aim to enhance trading access in different markets, increase visibility, or attract different investor bases while primarily being governed by the rules of the primary exchange.

JIANGSU LOPAL TECH. CO., LTD. is a leading global manufacturer of lithium iron phosphate cathode materials who has an Indonesian subsidiary namely PT. LBM ENERGI BARU INDONESIA, recently files for a secondary listing in HKEX following to its primary listing at the Shanghai Stock Exchange in April 2017.

What are the listing criteria at HKEX for dual primary listing?

The applicant and its business must, in the opinion of the Exchange, be suitable for listing. Suitability for listing will vary depending on the industry and operations in which the applicant operates.

A listing candidate must meet one of three minimum qualifications for listing on the HKEx: (i) Profits Test; (ii) Market capitalization/revenue/cash flow test or (iii) Market capitalization/revenue test.

The profits test requires candidates to have a min net profit requirement of at least HK$80 million over 3 years (and at least HK$35m in the latest financial year).

The market capitalization/revenue/cash flow test requires (a) a trading record of not less than three financial years; (b) management continuity for at least the three preceding financial years; (c) ownership continuity and control for at least the most recent audited financial year;

(d) a market capitalization of at least HK$2,000,000,000 at the time of listing; (e) revenue of at least HK$500,000,000 for the most recent audited financial year; and (f) positive cash flow from operating activities carried out by the new applicant, or its group, that are to be listed of at least HK$100,000,000 in aggregate for the three preceding financial years.

The market capitalization/revenue test requires (a) a trading record of at least three financial years; (b) management continuity for at least the three preceding financial years; (c) ownership continuity and control for at least the most recent audited financial year; (d) a market capitalization of at least HK$4,000,000,000 at the time of listing; and (e) revenue of at least HK$500,000,000 for the most recent audited financial year.

Other than the above, there are also other methods to list, however in practice these methods have not seen to be used as the criteria for complying with a dual listing requirement:

• Chp 18 Mineral companies
• Chp 18A Biotech companies
• Chp 18C Specialist Purpose companies
• Chp 21 Investment Vehicles

What are the listing criteria at HKEX for secondary listing?

1. Listing on the overseas issuer’s primary exchange must have been granted before listing on the Exchange can be granted;
2. Requirements of a secondary listing will vary depending on whether have weighted voting rights structure (WVR) or not.
3. If have WVR: (a) a market capitalization of at least HK$40,000,000,000 at the time of listing; (b) a market capitalization of at least HK$10,000,000,000 at the time of listing and revenue of at least HK$1,000,000,000 for the most recent audited financial year. 
4. If do not have a WVR structure must satisfy either Criteria A or B below:
   Criteria A
   (1) a track record of good regulatory compliance of at least five full financial years on a Qualifying Exchange (for any overseas issuer without a WVR structure) or on any Recognized Stock Exchange (only for overseas issuers without a WVRstructure and without a center of gravity in Greater China);
   and
   (2) a market capitalization of at least HK$3,000,000,000 at the time of listing.
   Criteria B
   (1) a track record of good regulatory compliance of at least two full financial years on
   a Qualifying Exchange; and
   (2) a market capitalization of at least HK$10,000,000,000 at the time of listing.

What are the challenges faced by Indonesian companies when considering: (i) dual primary listing and secondary listing at HKEX?

1. For a dual primary listing, passing the strict vetting process to be considered both eligible and suitable for listing. Listing requirements and disclosure requirements are extensive and are required to be fully verified. Each type of industry may have different disclosure requirements.
2. For a secondary listing, the major issue is pricing and arranging for a market maker.

Conclusion

The dual primary listing and secondary listing of Indonesian companies at HKEX presents both significant opportunities and challenges. Notwithstanding the opportunities to diversify
their funding sources, enhance international visibility, and strategically position themselves for growth in the Asian market, Indonesian companies must ensure the full compliance with
the local regulations as well as the listing rules at both IDX and HKEX.