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 (US$1 million) to participate in both the primary and secondary market of Special Purpose Acquisition Companies (SPACs), according to people familiar with the matter.

Hong Kong is planning to issue its SPAC framework for public consultation this month, meeting a timeline 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 (US$64 million).

Singapore two weeks ago proposed a threshold of S$150 million (US$112 million), cutting its original plan by half. The upcoming consultation is likely to seek public opinion on the market capitalization requirement.

The 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. Mainland media have 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,” said a spokesperson for Hong Kong Exchanges & Clearing Ltd.

“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.”

(SD-Agencies)