What Asian investors look for in a North American or Australian company

The Main Board's financial tests decide whether a company may apply. They do not decide whether it will be admitted, or whether investors will buy. Both questions turn on a judgement about the business itself: whether it will still be earning in three years, who controls its cash, and why it wants public money now. The Exchange has written down how it reaches that judgement, and in 2025 investors were asking much the same questions. This guide sets out the list so a board can test its own company against it first.

Suitability sits above the numbers

Rule 8.04 states that both the issuer and its business must, in the opinion of the Exchange, be suitable for listing¹. The numeric tests in Rule 8.05 (profit, or market capitalisation with revenue and cash flow, or market capitalisation with revenue) come after it¹. Suitability is a discretionary judgement, and the Exchange's guidance says there is no prescribed bright-line test for it². A company that clears every figure can still be asked to explain why its business will last.

What the Exchange reads as a sustainability concern

The Guide for New Listing Applicants opens its chapter on business sustainability with a warning: an applicant that meets the Rule 8.05 requirements at the time of filing may still raise concerns if it recorded deteriorating revenue and profit, or material losses, during or after the track record period².

The Exchange then weighs three things². The first is how susceptible financial performance is to changes beyond the company's control, with the example of a slight rise in raw material costs that cannot be passed on to customers and tips the company into a net loss². The second is whether the cause of a decline is expected to continue, as with a change in consumer preference or a product replaced by alternative technology, or is the ordinary cycle of the industry². The third is whether the applicant has shown it can mitigate the exposure or turn the business around, by diversifying revenue sources, expanding the customer base, or cutting costs².

A board that can answer those three questions on one page, with numbers, has done most of the vetting in advance.

The balance sheet and the receivables ledger

The Guide's list of features that raise concern starts with the balance sheet. Heavy indebtedness with minimal cash at bank and unutilised banking facilities, net current liabilities, and sole reliance on bank facilities to maintain a positive cash balance all appear on it². So does doubt about whether the company could raise independent financing once facilities guaranteed by its controlling shareholders are used up².

Significant trade receivables, long and deteriorating receivable turnover days that raise a recoverability question, inadequate credit risk controls over the creditworthiness of customers, and the loss of major customers are each listed². Reliance on discretionary government subsidies to meet debt payments closes the list².

We would expect a finance team to know its receivable turnover days for each year of the track record, and the direction of travel, before a sponsor asks.

Business model, concentration and unusual arrangements

A second group of concerns sits in the business model: a loss-making history likely to continue in the foreseeable future, made worse by uncertainty over expansion plans; an applicant that is primarily a price taker with little bargaining power over customers or suppliers; and a cash flow mismatch between the settlement of expenses and a long billing cycle with major customers².

A third group covers factors outside the applicant's control: high customer concentration that raises doubts about bargaining power, projects with very long break-even or payback periods, unusual business arrangements without solid evidence that they follow an industry norm, and infrequent, unpredictable, non-recurring sales with no analysis of the company's ability to sustain them².

Mid-market companies in North America and Australia often grew up around a few anchor customers. That history is not disqualifying, but it will be examined.

The reason for listing, in writing

In assessing suitability the Exchange may consider whether the listing is consistent with the applicant's business strategies, including the proposed use of proceeds, and whether the applicant has genuine funding needs². An applicant that cannot demonstrate the commercial rationale for listing may be found not suitable².

The Exchange expects a detailed analysis of the use of proceeds, at a level of specificity commensurate with the applicant's past and future business strategies and observed industry trends, and of future objectives and strategies, demonstrating a detailed strategic plan for operations and growth². A use of proceeds section that reads as a placeholder invites a query on the whole application.

What investors were asking in 2025

Global IPO investors in 2025 were applying increased scrutiny to fundamentals, profitability pathways and governance, and were seeking resilient business models that can withstand market fluctuations and deliver sustainable growth³. Read against the Guide, that is the same enquiry from the buy side: is the profit real, will it survive a change in conditions, and can the board be trusted with the answer. The work that satisfies the Exchange on sustainability is the work that satisfies the fund manager.

Where the pipeline sits

As at 7 December 2025, active IPO applications in Hong Kong were distributed 39 percent technology, media and telecom, 21 percent healthcare and life sciences, and 18 percent industrials⁴. The pipeline as a whole held more than 300 applications⁴, and the commentary behind it describes a steady influx of tech and biotech firms choosing Hong Kong, with rising participation from foreign investors⁴.

For a company in one of those three sectors, that means comparables, specialist coverage and investors who already hold the peer group. For a company outside them, the sector case has to be made from first principles.

The questions we would put to a board

• Has revenue or profit fallen in any track record year, and is the cause cyclical or structural²?
• What are cash and unutilised facilities against debt, and does any facility rest on a shareholder guarantee²?
• What are receivable turnover days for each of the three years, and which way are they moving²?
• What share of revenue comes from the largest customers, and has a major customer been lost²?
• Does any subsidy income go toward debt service²?
• Is the company in technology, media and telecom, healthcare and life sciences, or industrials, and if not, what is the sector argument⁴?

The next step

Ask the chief financial officer for a sustainability schedule covering the last three audited years: cash and unutilised facilities against debt due, receivable turnover days by year, revenue by largest customers, and any subsidy income set against debt service². Alongside it, draft the use of proceeds section to the standard in the Guide, tied to a written strategic plan². Put both in front of a Hong Kong sponsor and ask one question: on these numbers, would the Exchange raise a business sustainability query. The answer decides whether the application goes in now or after another year of trading.

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