Over the past few years, Hong Kong has been the preferred listing destination for Southeast Asian companies—especially Malaysian firms—thanks to its flexible listing requirements and internationally recognised fundraising mechanisms.
But a reality has become increasingly clear:
For small-to-mid-cap Malaysian companies, the Hong Kong market is not a new beginning, but the beginning of a structural challenge.
Public data shows that nearly 20 Malaysian companies are currently listed in Hong Kong. However, most have market capitalisations of only HKD 100–1,000 million, with some even staying below HKD 300 million for long periods—naturally excluded from the mainstream liquidity ecosystem in Hong Kong.
From an investment banking perspective, although these companies meet listing criteria and bear annual compliance costs of HKD 2–5 million, their market caps are far below the HKD 5 billion Stock Connect requirement, which makes them unable to attract Mainland China capital or institutional investors.
The result is a structural negative cycle:
Thin liquidity → Limited financing ability → Persistent valuation discount → Market cap becomes unrepairable
🔥 01｜Liquidity Drain: Small Caps Are Naturally Marginalised in Hong Kong
Liquidity in the Hong Kong market is extremely concentrated:
- 80% of total trading volume comes from 20% of large-cap blue-chip stocks
- The remaining 80% of listed companies rely almost entirely on retail investors for minimal trading
For Malaysian companies, the gap is even more pronounced.
Their average daily turnover is typically only HKD 200k–800k, and often drops below HKD 100k.
Low turnover means:
No price discovery → No analyst coverage → No investor attention → Weak valuation
The key issue:
- Stock Connect requires a HKD 5 billion market cap
- Most Malaysian issuers only have HKD 100–1,000 million
- They lose access to the largest liquidity source: Mainland China institutional capital
This creates a self-reinforcing loop:
The smaller the company → the worse the liquidity → the less research → the harder it becomes to grow
💰 02｜Financing Function Collapses: Listing Becomes the End, Not the Beginning
Many Southeast Asian companies choose Hong Kong because of its:
- Flexible placement mechanisms
- Internationalised fundraising structure
- Multiple tools for secondary offerings
But the reality is stark:
For small-cap Malaysian companies, these fundraising tools are almost unusable.
Why?
- Liquidity is too low for institutions to take placement blocks
- Any fundraising announcement easily triggers a sell-off
- Lack of research coverage means nobody is willing to participate in secondary fundraising
In practice,
99% of Malaysian Hong Kong-listed companies lose their ability to raise capital from the secondary market on the very first day of listing.
Listing, which should have opened the capital channel, becomes a financing dead-end.
📉 03｜Cost–Benefit Mismatch: Maintaining the Listing Becomes a Burden
Annual maintaining costs for a Hong Kong Main Board issuer include:
- Audit: HKD 0.8–1.5 million
- Legal: HKD 0.2–0.5 million
- ESG reporting: HKD 0.2–0.6 million
- Exchange annual fees: HKD 0.15–0.5 million
- Company secretary & IR: HKD 0.2–1 million
Totaling roughly HKD 2–5 million per year.
For companies with a market cap of only HKD 300–500 million, this is a heavy, recurring fixed cost.
Meanwhile, HKEX regulatory requirements continue to tighten:
- Compulsory CPD training for directors
- More complex ESG data requirements
- Governance structure upgrades
This forces companies to allocate more operational resources just to stay listed, creating a “reverse squeeze”:
Maintaining listing status comes at the cost of business growth.
📉 04｜Valuation Mismatch: Good Companies Become “Cheap Stocks”
For many Malaysian issuers in Hong Kong, valuations are not based on earnings, but on liquidity.
- Even profitable companies only trade at 3–6x P/E
- Growth companies struggle to “tell their story” because trading is too thin
Hong Kong’s structural reality is:
Weak liquidity → Low valuation → Fewer trades → Even weaker liquidity
Many fundamentally solid companies eventually turn into “zombie stocks”.
🧾 **05｜Case Study: Hing Hup Holdings (01891.HK)
A Solid Operator That the Market Fails to See**
Hing Hup Holdings, a long-established Malaysian metal recycling business, operates with stable supply chains, healthy cash flow, and a well-protected business model—by all measures a high-quality company.
Yet its market cap has long stayed in the HKD 100–400 million range, with very thin trading volume.
Its dilemma is not operational, but structural:
- Small market cap → Not eligible for Stock Connect
- No Stock Connect → No Mainland institutional flows
- Weak liquidity → No research coverage
- No coverage → No investor understanding
- No incremental capital → Valuation permanently depressed
Hing Hup is not an isolated case—it is the portrait of Malaysian issuers in Hong Kong.
Many good businesses become bad stocks.
🔍 06｜The Core Issue: Hong Kong’s Market Structure Is Inherently Misaligned with Malaysian SMEs
The fundamental mismatch lies in the ecosystem itself:
- Hong Kong favours large-cap blue chips
- Stock Connect thresholds exclude small-mid caps
- Institutions avoid micro-caps
- Retail-driven trading is unstable
- Compliance costs are high
- Analyst coverage is scarce
This forms a natural structural barrier.
It does not affect large corporations, but for small-to-mid-cap Malaysian companies, it is a structural trap.
⭐ 07｜Why the U.S. Market Is More Suitable for Malaysian Companies
Compared with Hong Kong, U.S. markets offer clear advantages:
- World’s deepest liquidity
- Mature ecosystem for small-cap companies
- Highly efficient PIPEs, follow-on offerings, and convertible notes
- Broad analyst and institutional coverage
- Growth stories and innovation narratives are better understood
- SPAC and other U.S.-style instruments enhance fundraising ability
For small-cap companies, the U.S. market frequently provides:
- Higher valuations
- Stronger liquidity
- More frequent fundraising opportunities
- Wider investor base
Advantages Hong Kong cannot replicate in the short term.
🏁 Conclusion｜Listing Is a Strategy, Not a Destination
For Malaysian companies, the key strategic questions are:
- Is your goal fundraising?
- Is your goal valuation enhancement?
- Is your goal global investor visibility?
- Is your goal institutional participation and capital cycling?
If the answer is “yes,”
U.S. markets are significantly more aligned with the growth path of Malaysian small-to-mid-cap companies.
Hong Kong is not “bad,”
but its ecosystem is simply not designed for Malaysian SMEs.
Choosing where to list is choosing the possibilities of your next 10 years.
The right capital market is the one that allows your company to truly be seen.