Sep 10, 2021 03:42 PM

Hong Kong Plans to Limit Retail Investor Access to SPACs

Buildings in Hong Kong on May 26. Photo: Bloomberg
Buildings in Hong Kong on May 26. Photo: Bloomberg

(Bloomberg) — Hong Kong plans to curb access for retail investors to buy and trade blank check companies as regulators in the city prepare to roll out a framework this month.

The city will propose to only allow what it deems as professional investors with assets of more than HK$8 million ($1 million) to participate in both the primary and secondary market of special purpose acquisition companies, according to people familiar with the matter, who asked not to be named discussing the plan before it has been made public.

Hong Kong is planning to issue its SPAC framework for public consultation this month, meeting a time line announced by the city’s financial secretary. While a wider investor base was preferred, most of the market participants who met with the authorities agreed to the limit because it could mitigate risks in the initial phase and ensure a smooth start to allow for an expansion later, the people said.

A question remains on whether SPACs should meet the same market capitalization requirement as regular main board companies, currently set at a minimum of HK$500 million ($64 million). Singapore last week proposed a threshold of S$150 million ($112 million), cutting its original plan by half. The upcoming consultation is likely to seek public opinion on the market capitalization requirement.

While acknowledging risks, Singapore has, like the U.S., placed no restrictions on retail investors.

Hong Kong’s plan could still change as regulators are making final edits to the consultation draft, the people said.

SPACs became the hottest products in global finance earlier this year, sparking a frenzy of issuance but also increased scrutiny from regulators. Hong Kong, now playing catch-up, has stressed the importance of protecting investors. Official media in China has also voiced concerns, calling SPACs a “blind-box game” for ordinary investors.

“We are always looking for ways to enhance our listing framework, striking the right balance between delivering appropriate investor protections, market quality and market attractiveness,” a spokesperson for Hong Kong Exchanges & Clearing Ltd., said in an email. “HKEX is continuing to evaluate the feasibility of a Hong Kong SPAC framework, and we look forward to consulting the market on this in due course.”

Shares in HKEX rose 2.2% as of 10:11 a.m. in Hong Kong.

A spokesperson for the Securities and Futures Commission declined to comment on the details in this story.

Professional investors are individuals with a portfolio of at least HK$8 million, including stocks, bonds, bank deposits and cash. They are deemed as more sophisticated and can be exposed to more complex and risky products, without the same level of protection as retail investors.

Retail investors accounted for about 20% of all trading in Hong Kong in 2019, according to a survey by the exchange released last year.

Contact editor Michael Bellart (

Download our app to receive breaking news alerts and read the news on the go.

Get our weekly free Must-Read newsletter.

You've accessed an article available only to subscribers
Share this article
Open WeChat and scan the QR code