SYDNEY, Australia — Hong Kong's push to attract more specialist technology companies to carry initial public offerings (IPO) has attracted just two firms to list in more than a year after regulators introduced new rules in an attempt to revive the city's flagging capital markets.

Hong Kong's fortunes are pinned to having active capital markets, especially IPOs, and while deal activity remains subdued, so does the city's role as a regional financial center.

The Hong Kong Stock Exchange announced in March 2023 the 18C regime that would permit easier access to listing for smaller companies which specialize in next generation information technology, such as cloud-based services, AI and advanced hardware and services.

Regulators hoped the changes would bring about a rush of deals from the smaller tech firms but just two have opted to list in the past 12 months.

QuantumPharm, an AI drug research firm, raised $127 million in June.

Chinese driving chip designer Black Sesame International will start trading on Thursday.

Under the 18C requirements, commercialized firms need to have a HK$6-billion ($769.99-million) market capitalization and revenue of at least HK$250 million for the most recent financial year. Earlier stage companies need a HK$10-billion market capitalization and while there are no minimum revenue restrictions, firms need to outline a clear plan to achieve revenue.

But experts believe the requirements are too strict.

"A lot of those potential 18C applicants are pre-revenue or have very little revenue, and if they want to list now, the valuation may not be ideal compared to what they achieved in their previous fundraising rounds," said Freshfields partner Richard Wang. "So founders of these companies may opt to do more pre-IPO fundraising before they consider listing."

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