Penny Wise Pound Foolish: Hong Kongs Penny Stock Incident Harvard Case Solution & Analysis

In 2002, HKEx published a discussion paper with proposals for the continuation of the Listing Rules "penny" stocks. Panic ensued sales, as investors believe that they are about to lose a market for their shares, as well as protection of the Listing Rules. In one trading day, approximately 10% of the market capitalization microcaps was destroyed. What went wrong? Was this related to the status of the Exchange as a non-profit organization following its demutualization? To shed investor skepticism about the quality of listed companies and to ensure its competitiveness in comparison with other financial centers, Hong Kong desperately needs better rules to ensure market transparency and improved corporate governance. "Hide
by Ka-Fu Wong, Jennifer Lee Source: University of Hong Kong, 15 pages. Publication Date: September 20, 2005. Prod. #: HKU427-PDF-ENG

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